ART Issues World’s First Jurisdictional Forestry TREES Carbon Credits to Guyana
EM Strategic Supporter Press Release

ARLINGTON, VA, 1 December 2022 – The Architecture for REDD+ Transactions (ART) has issued the world’s first TREES credits to Guyana. This also marks a milestone as the first time a country has been issued carbon credits specifically designed for the voluntary and compliance carbon markets for successfully preventing forest loss and degradation — a process known as jurisdictional REDD+.

Following completion of an independent validation and verification process and approval by the ART Board of Directors, ART has issued 33.47 million TREES credits to Guyana for the five-year period from 2016 to 2020. These serialized credits, listed on ART’s public registry, are available to buyers on the global carbon market, including for use by airlines for compliance with the International Civil Aviation Organization’s global emission reduction program, CORSIA, as well as for use toward voluntary corporate climate commitments.

Guyana’s completion of the ART process paves the way for other governments that are looking to receive carbon market finance for success in protecting and restoring forests. Currently, 14 other countries and large sub-national jurisdictions are working toward their own issuances of TREES credits.

Frances Seymour, the Chair of the ART Board, congratulated the Government of Guyana and the many domestic stakeholder groups who contributed to this achievement, which recognizes the success the country has had in protecting its forests. “Guyana is the first to complete the ART process for generating high-integrity, Paris Agreement-aligned carbon credits that will allow the country to access market-based finance to continue to implement forest stewardship strategies. ART, other governments, and important stakeholder groups, especially Indigenous Peoples and local communities, around the world can now build on Guyana’s experience to accelerate progress towards meeting global forest and climate goals in ways that ensure environmental and social integrity.”

Vice President of Guyana, Dr. Bharrat Jagdeo lauded Guyana’s leadership and tenacity, which started in 2007 when Guyana set out a far-reaching vision for how national scale action on forests could unlock huge global benefits in the fight against climate change, the preservation of biodiversity, and building energy and food security. The Vice President stressed that ambitious progress was possible – in Guyana and elsewhere – if the peoples of forest countries designed their own way forward so that action on forests boosted their legitimate development aspirations.

“The people of Guyana continue to be willing to play their part – but we also need international standards that keep pace with what science tells us is needed to safeguard the world’s vital tropical forests. So, we are pleased that ART-TREES was created to help accelerate global climate action – by recognizing what forest countries like Guyana have long called for: that the time for small-scale pilots and projects is long past, the world needs jurisdiction-scale action to make the required impact, and the world also needs to value the ecosystem services that tropical forests provide. Today, the vision set out in 2007 moves to the next phase – where payments for forest climate services can be sourced from global carbon markets. We are pleased that the vision of fifteen years ago moves forward in a major way today,” the Vice President said.

The independent validation and verification process was conducted by Aster Global Environmental Services, Inc., an internationally accredited environmental services company, which audited Guyana’s REDD+ results for conformance with both the carbon accounting requirements and the rigorous social and environmental safeguards of TREES.

On behalf of his colleagues, the Chair of the National Toshaos’ Council in Guyana, Toshao Derrick John said, “The National Toshaos’ Council welcomes this important milestone in Guyana’s programme on Low Carbon Development which will further support the development of sustainable livelihoods and protection of forests within indigenous communities. As the national body which represents all elected Indigenous Villages Leaders in Guyana, the NTC is pleased that Guyana is pioneering efforts on climate finance that will bring direct benefits to Indigenous peoples in advancing climate resilience and sustainable livelihood opportunities.”

Endorsement for the government to sell credits from Guyana’s Indigenous lands — both titled and untitled – including the terms of benefit sharing, was given by the National Toshaos’ Council, which includes leaders elected by each community and is the legal representative of Indigenous peoples in Guyana.

Guyana’s TREES credits are also the first market-ready credits issued to a jurisdiction classified as “High Forest, Low Deforestation” (HFLD), which means it has high forest cover and low historical rates of deforestation. Carbon markets have historically focused predominantly on areas that have already experienced high rates of deforestation. This is now starting to change with the first TREES credits issued to Guyana.

Prior to the crediting approach in TREES, there had not been a market-oriented approach that allows HFLD jurisdictions to benefit from carbon market finance. The HFLD crediting approach in TREES recognizes that HFLD jurisdictions must continue to aggressively protect forests to avoid deforestation and degradation, and that carbon market finance can be a powerful incentive to help achieve this. All HFLD credits are tagged as such on ART’s public registry.

Mary Grady, Executive Director of the ART Secretariat, said, “Our planet’s last intact forests are under mounting threat of irreversible, permanent loss if new approaches to protect them are not urgently supported. Without the proper financial incentives to value forests and the actions that protect them, there is no guarantee that forests in HFLD areas will remain standing in the long run. Providing a pathway that incentivizes jurisdictions to keep their forests standing will create a more effective and equitable global system for forest protection and restoration.”

Today’s VCM, Explained in Three Figures

Is the market truly booming? Are offsets the next big solution or a scam? And what’s up with carbon crypto tokens? Here’s a quick tour through the voluntary carbon market, courtesy of our Ecosystem Marketplace analysts.

If you want to learn more, visit our public Data Intelligence & Analytics Dashboard, and download the latest State of the Voluntary Carbon Markets report, where all of these insights were first published.

One: Voluntary carbon credit transactions quadrupled in value last year, but in the big picture, they’re still a drop in the bucket.

Voluntary Carbon Market Value, pre-2005 to 2021.

Source: Ecosystem Marketplace, 2022.

Voluntary markets leapt from $520 million in 2020 to $2 billion in transactions in 2021. That jump was driven in large part by rising prices for credits, especially for nature-based credits for activities like reforestation, “blue” carbon from coastal and marine ecosystem projects, and avoided forest conversion. Buyers like these credits in part because they deliver non-carbon benefits such as income for communities, or protecting biodiversity. We’ll come back to that point later.

This boom is a sign that net zero carbon pledges are moving the needle, and companies and other actors are using offsets to trim emissions that are otherwise hard to cut right away.

It also means $2 billion in additional finance for green projects around the world. Overall, the voluntary carbon markets have delivered $8 billion in climate finance since we began tracking them in 2005. That’s a significant contribution to the climate effort, but when you compare it to, say, fossil fuel subsidies, which total $6 trillion a year, it’s a pretty small number.

Likewise, when you measure humankind’s total global emissions every year, voluntary carbon market activity at 500 million tons equates to only about five days’ worth of emissions. Carbon offsets, in other words, are a useful tool, but neither a silver bullet nor a global menace.

Two: Carbon credits are more like sandwiches than soybeans.

What’s in a Category? Ecosystem Marketplace’s Carbon Offset Project Typology, 2021.

Source: Ecosystem Marketplace, 2022.

In other words, they’re much more a heterogeneous product (with attributes that vary significantly from one another, and consumer segments with different quality preferences) than a homogeneous commodity. That might not be immediately obvious – isn’t a ton of carbon always a ton of carbon when it comes to mitigating climate change?

Yes. And yet one of the side effects of a renewed focus on carbon markets integrity has been a sharpening of preferences on attributes that differentiate one ton of CO2e from another: does the project deliver co-benefits for communities or biodiversity, for example? Is it a carbon reduction or removal? Is the credit nature-based or technological?

Suppliers have responded with lots of choices. We tracked 170 different credit types transacted last year. The figure above shows them grouped into eight general categories.

We’re seeing a very clear price premium above that price for credits with additional non-carbon social and environmental benefits. Projects in the Forestry and Land Use category command the largest share of trades (46%) and the highest prices with a weighted average price in 2021 of $5.80 per ton. (Our 2021 global benchmark price across the whole market is $4.00 a ton.)

Renewable energy comes in second in terms of trading volumes (43% of trades) but at far lower per-credit prices: $2.26/ton on average in 2021, probably reflecting a consumer segment that is mainly buying based on price – a very different group from the Forestry and Land Use buyers.

Ecosystem Marketplace has made a number of upgrades to its data infrastructure and user services in response to this diversity, to provide richer, more detailed, and even more highly vetted data. A high-integrity market requires not just transparency but granularity. As we’ve seen, there’s more to a credit than a ton of carbon.

Three: Direct relationships and a good project story are still preferred over more standardized exchanges and crypto.

Buyers’ and Sellers’ Preferred Voluntary Carbon Market Transaction Methods, 2021.

Source: Ecosystem Marketplace, 2022.

We’re seeing lots of new entrants offering new ways to trade carbon credits. We asked our Global Carbon Survey respondents how they prefer to buy and sell.The vast majority still prefer bilateral deals between project developers and end buyers. These are advantageous for project developers, who can respond directly to corporate requests for proposals and build a relationship. Project developers also get to shine in retail marketplaces and niche marketplaces (the third and fourth most popular transaction options) that allow for storytelling and rich information about projects. And buyers get to develop a more direct relationship with the project proponents, who may be half a world away.

Intermediaries such as futures exchanges are popping up these days, but have yet to gain as much traction. By working with digital spot trading exchanges they can also offer standardized futures contracts pegged to specific project attributes or compliance requirements. As futures contracts become more common (so buyers can secure future supply of credits), these exchanges could get more popular.

Crypto has had a lot of recent media coverage, but was identified as respondents’ least preferred transaction method. Blockchain, as a disruptive technology, could represent a new area of innovation and growth, or, if abused, a throwback to the old “carbon cowboys” days of the voluntary markets. Several leading market institutions are developing guardrails to make sure that tokens marketed as delivering the benefits of carbon credits are in compliance with the standards bodies issuing the initial credits.

EM Respondent Blog
Simplifying and amplifying best practice in using carbon credits for climate action

The climate crisis is urgent and progress is slow.

Despite efforts to up ambition, the climate pledges by governments remain woefully inadequate in limiting average global temperature rise to 1.5℃ – the figure climate scientists define as the threshold of safety.

We know that targets have been set – but society’s ability to meet them moves further out of reach every day. The annual UN Emissions Gap report remains a constant reminder of the yawning gap that persists between the emission reductions considered in governments’ climate pledges and the reductions we need.

In today’s divided age, one of the few things that most of us can agree on is that we must dramatically increase the speed and scale of climate action today to avoid the irreversible effects of climate change tomorrow. We must find effective ways to finance clean technology, fair transitions, and global emission reductions. In all of this, the role of the private sector in ramping up climate finance is critical, particularly in light of the highly insufficient action by governments.

Importantly, we all want to make sure our efforts have the greatest possible impact. In this vein, carbon credits, and the voluntary carbon markets (VCM) on which they trade, may be the most misunderstood climate solution in the world. The carbon credits (or offsets) sold via these marketplaces are validated and certified via rigorous standards applied by 3rd party auditors, and have already channeled billions of dollars in finance to drive verifiable climate change mitigation – well ahead of government regulation on climate change and as standards continue to improve in line with new science, technologies, and lessons learned to ensure high quality.

No other form of finance can claim the level of transparency in measuring impacts as carbon credits. And while voluntary markets are far from perfect, they work.

Carbon credits remain one of the most viable, near-term options for companies to measurably reduce global emissions. With emissions-free operations still a far-off prospect, science says that companies must invest in emission reduction activities beyond their direct operations, for example through certified carbon credits – all while working on the long term task of decarbonizing their value chain. Done right, the VCM can deliver much-needed finance, technical capacity, and significant sustainable development benefits that can help countries reach their goals, and transition the world to the low-carbon future that it needs.

But the complexity of the VCM and the fact that corporations are often motivated to use credits to polish their image, make offsets easy to criticize – and the system difficult to understand. A related challenge has to do with companies credibly using carbon credits as part of corporate targets and talking about the role that carbon credits play in their overall climate action efforts. Part of the problem is that the latest best practice in using carbon credits is not simple, actionable, or written in a language easy to understand by most companies and CEOs.

To truly move the dial on addressing runaway climate change, carbon credits should be used and talked about by corporations according to a clear set of principles that simplify and amplify the right way to do things – grounded in science and building on the work of many credible initiatives, such as the Science-Based Targets initiative (SBTi) and the Voluntary Carbon Markets Integrity Initiative (VCMi), among many others.

Our hope is that these principles will empower governments, businesses and society as a whole to have an informed discussion around the importance of carbon finance as part of global climate action.

This blog first appeared on South Pole’s Penguin Perspectives.

FSC launches its Climate Coalition at COP27 to drive progress on forest-based climate solutions

12 November 2022 | Today at the 2022 United Nations Climate Change Conference (COP27), FSC Director General, Kim Carstensen, officially launched the FSC Climate Coalition as a new forum to convene key stakeholders in the fight against climate change.

The FSC Climate Coalition will be a multi-sector partnership platform for creating and testing climate solutions that originate from forests. The goal of the initiative is to turn ideas into action by bringing together partners who might not otherwise interact to collaboratively refine and pilot projects. Included in the group will be perspectives from various points in the value chain – project developers, corporations, investors, carbon standards, indigenous representatives, environmental groups and research bodies.

Reflecting on the need for partnership, Kim Carstensen said “FSC has over 26 years of experience as a convening body. Now, let’s put that to use in ensuring that forests are incorporated in climate action in a way that benefits forest stewards. To do this, we need partners.”

Carstensen was joined on stage by senior representatives from some of the first FSC Climate Coalition members: FSC certificate holders Ikea and SIG, the non-profit Forest Trends, the project developer South Pole, as well as carbon standards Verra and Gold Standard.

Marco Magini, Director Climate Projects at South Pole, voiced their enthusiasm for the initiative “Such collaborations enable open, honest conversations about what’s working and what’s not, which allows all of us to learn faster. We’re already well into our ‘decade of action’ and we just cannot afford to have everyone trying to figure out forest-based climate solutions by themselves. We must work together to have a true climate impact, and we must act faster, today.”

Nature-based solutions (NBS) have been a major topic at COP27 this year, with a growing consensus that forests have a role to play, particularly in the ongoing conversation about carbon accounting. Reflecting on the latest trends, Stephen Donofrio, Managing Director, Forest Trends’ Ecosystem Marketplace and Supply Change initiatives, shared that “In the voluntary carbon markets, we’ve seen that climate is the bait and co-benefits are the hook, when it comes to increasing demand and price paid per credit. Our data consistently shows market preferences for carbon credit projects that are rich in social, biodiversity, water and other environmental attributes”.

Tackling the complexity of certification, carbon accounting, carbon credits, and carbon rights will be the first major topic for the FSC Climate Coalition, which will begin to formally convene in early 2023.

This article first appeared on the FSC News Centre.

For more information on the FSC Climate Coalition, please reach out to Theresa Keith ([email protected]).

Scaling up forest-based solutions for planetary crises


15 November 2022 | “The world is facing climate change, deforestation, and biodiversity loss,” said Janne Narakka, the Strategic Planning Committee Chair of the Forest Stewardship Council (FSC)’s Board of Directors. “Forests are currently high up on many global agendas: there are many different expectations on them – and on the solutions they could provide.”

He made the comments at a keynote session during the FSC’s General Assembly 2021-2022, held on 11 October 2022 in Bali, Indonesia, which set out to explore the central role of forests in the face of these crises and highlight the work required by institutions like FSC to ensure that forest-based solutions are deployed as effectively – and equitably – as possible. “With an estimated strong increase in global timber demand, we have to work to expand FSC’s forest management to bring our impact to new areas,” said Narakka; “but at the same time, it is important to work on new services to respond to the new demands on forests – such as for biodiversity and water purification.”

On that note, Valentina Lira, the sustainability director of Chilean winery Concha y Toro (the second largest winery in the world), shared her company’s approach to implementing FSC’s Ecosystem Services Procedure (ESP), which allows groups to identify, measure, and verify the positive impacts of responsible forest management. “Forestry is not our business; making wine is our business,” she said. “So for us, it was a very challenging idea to work with the FSC standard to certify the forest management that we have in the natural forests surrounding our wineries.”

However, it was increasingly apparent to the company that these forests were providing them with important services, such as regulating the water cycle, preventing erosion, and providing biodiversity that helped with pollination and pest control. So, they signed up to FSC’s ESP, with great results. “It was able to provide us not only with protection of the forest, but also a better relationship with the local community,” said Lira, “and compliance for our commitment to being a [carbon] net-zero company.”

Esther Rohena, the head of climate finance company South Pole’s Global Expansion and Partnerships division, shared some of her organization’s work as a “one stop shop for climate solutions,” which “leverage(s) our finance through the sale of carbon credits and public buyers to projects which are implemented in collaboration with NGOs, local communities, and forest owners.” For Rohena, providing financial assistance for implementers to gain certification is a critical piece of the puzzle.

Stephen Donofrio, the managing director of Ecosystem Marketplace – a standardized Voluntary Carbon Markets (VCM) end-to-end transparency platform – affirmed the growth in popularity of these kinds of projects. “There’s a demand part of this market that is increasingly seeking what is being called ‘high-integrity credits’,” he said. “Many buyers consider nature-based projects to be very valuable in terms of the benefits that they provide beyond carbon, as well as the climate benefits,” said Donofrio, affirming that buyrs are frequently willing to pay more for these. He also highlighted the importance of ensuring that Indigenous Peoples are “at the table for fair and equitable revenue-sharing from market-based approaches, and are also respected in terms of their support of biodiversity and the other [non-carbon] benefits that they provide.”

While the importance of forest restoration is extremely apparent at multiple levels, Michael Brady, a Principal Scientist at the Center for International Forestry Research – World Agroforestry (CIFOR-ICRAF), warned this is not simply about getting trees in the ground. “We coined the phrase ‘planting the wrong tree in the wrong place – and many are left untended’ to express our concern about the overreliance on tree planting, as opposed to tree managing,” he said.

As such, CIFOR-ICRAF has been working since the 1990s to promote a strategic forest landscape restoration approach, boosting governance, supporting communities, promoting natural regional regeneration as a restoration strategy, and exploring new opportunities for restoration, such as in conjunction with biomass production for energy and livelihoods, and as part of efforts to reduce fire and haze.

Lee White, Gabon’s Minister of Water, Forests, the Sea, and Environment, provided a compelling example of the need to safeguard against illegal deforestation as a starting-point for offering any kind of effective forest-based solutions. Following the revelation in 2017 of a USD300 million-per-year illegal forestry industry in the country, “we had to take drastic action,” said White.

The President declared that all forestry operations in Gabon needed to be FSC-certified by 2022. “We felt that we needed to bring in an international watchdog to validate management practices in order for Gabon to maintain its market share in the future,” he said.

The government is also working on a traceability system that will ensure that QR codes “follow living trees in the forest all the way to destinations outside of Gabon,” said White. It is also modernizing its system to be able to prove that Gabonese timber is legal, carbon positive, biodiversity positive, and socially responsible.


Photo: Production of latex from rubber tree (Hevea brasiliensis) in Thailand. Latex is an important non-timber forest product. By Michael Brady/CIFOR-ICRAF.

COP 27: Are Carbon Markets A Solution To A More Sustainable World Or A New Speculative Bubble?
an EM Strategic Supporter Blog by Livelihoods

9 November 2022 | In this maelstrom, there is a growing interest in “nature-based solutions” as they are called: the fight against deforestation, restoration of natural ecosystems, low-carbon agriculture, oceans, etc. We can be happy to see new players arrive and to see this sector finally taking off and mobilizing private capital to complement public investments. The stakes and needs are such on a global scale that this movement must be strongly supported and encouraged. However, to ensure that this craze for carbon finance contributes to truly sustainable solutions and does not end dramatically with the bursting of a speculative bubble, a certain number of rules must be established and respected. In the approach of COP 27, Bernard Giraud shares some thoughts inspired by his experience with the Livelihoods Funds.

Bernard Giraud
Bernard Giraud, President & Co-Founder of Livelihoods Venture

Reducing versus compensating for carbon emissions? That is not the debate

The first of these rules is that carbon offsetting should not be a substitute for reduction efforts. The priority for each actor, whether private or public, is to engage in a profound transformation towards low-carbon practices. However, no actor can reach the “net zero” objective through reduction alone. Offsetting has therefore an important role to play and it makes no sense to oppose reducing and offsetting. But let’s not fight the wrong battle. The Livelihoods Funds have been investing in large-scale programs since 2009 and deliver significant volumes of certified carbon credits each year to companies that have invested in our funds to offset their unavoidable carbon emissions. Most importantly, the investments made have very significant social and environmental impacts for the local populations. What have we learned over the past decade?

Not all carbon projects are equal

First, not all “carbon projects” are equal. For example, investing in tree planting of a single species over hundreds of hectares certainly allows for the creation of a “carbon sink” and therefore for the acquisition of certified carbon credits. But does such a plantation have the same impact on biodiversity or the living conditions of local populations as an agroforestry project that helps hundreds of producers adopt sustainable agricultural practices? Is it enough to “plant trees” or, more broadly, to create the conditions for these trees to flourish? Does an industrial monoculture plantation have the same value as an investment in the preservation or restoration of a forest that is a living ecosystem rich in biodiversity? From a purely economic or carbon storage point of view, these projects can compete. Yet their impacts are very different. Looking at a project solely from the point of view of carbon yield or financial profitability can lead to dramatic errors. Because we are faced with the need to deeply transform our current production systems. This transformation must consider the diversity of environmental and social issues.

The projects supported by the Livelihoods funds succeed because they are based on the aspirations of the local rural communities. They contribute to environmentally sustainable solutions but also to improving the living conditions of farmers and their families. These systemic transformation projects are obviously more complex to design and implement. They require quite a specific know-how, a long preparation with competent teams and high-quality partners. They require time and finding the means to accompany this transformation over time. They require the courage to invest and take certain risks to provide the financial resources that poor rural communities often lack.

A systemic transformation of farming models

A major challenge for carbon finance is how it can contribute to the transformation of agriculture to meet both food and environmental needs. In the North, how can we support modern farms in their transformation to low-carbon agriculture, which restores soil fertility and biodiversity while maintaining a good level of production per hectare? In the South, how to support the hundreds of millions of smallholder family farms to ensure a decent income through agricultural practices that do not lead to the destruction of the still available natural resources?

The Livelihoods Funds work with companies that process agricultural raw materials for food or other products. These companies have recognized the need to support these transformations upstream of their industrial and commercial activities. More and more of them are setting targets for tonnages and hectares converted to regenerative agriculture practices. This necessary shift is complex and fraught with challenges. No single category of actor can make this shift successfully, on their own. We need operational coalitions that allow actors in the food chain to work together on concrete projects in each territory: farmers and their organizations, companies, NGOs, research, public authorities, etc. It is by combining the financial resources and skills of all these actors together that the transition becomes accessible to everyone.

A role assigned to the Governments: defining clear rules and finding the right balance

Since the Paris Agreements, several countries have made commitments to reduce their carbon footprint and most of them are in the process of defining the rules that will apply in their own country for the allocation and transfer of carbon rights under Article 6. The crucial question of solidarity and justice between formerly or recently developed countries with high emissions and developing countries with low emissions and high exposure to the effects of climate change has been at the heart of international negotiations for too many years.

The private funding provided through “voluntary carbon” projects can only be a contribution in addition to state agreements of a completely different scale. But this contribution can be significant for many states by focusing on nature-based solutions projects that are difficult to finance. The efforts of states and private investors in “carbon finance” should not be pitted against each other in sterile debates about “double accounting”. The carbon impacts generated by these projects benefit the territories and populations as much as the investors who took the risk of financing them. It is not a question of opposing approaches but rather of seeking synergies: it is in the interest of governments to attract financing that will enable them to move towards their climate objectives, and investors need a defined framework and clear rules to secure their rights.

Separate the wheat from the chaff

But which type of investments? If we look at the mainly financial motivations of some “carbon finance” players and their desire to simplify and focus solely on obtaining carbon credits, we can fear that the cure is sometimes worse than the disease. With the risk of discrediting carbon projects altogether. Therefore, we believe it is essential to encourage a segmentation of this market so that buyers of carbon credits can identify the real value of what they are buying. The Livelihoods Funds therefore support the efforts of standards and all stakeholders who are committed to carbon projects with high environmental and social value. It remains to succeed in this effort of differentiation without falling into the trap of multiplying complex standards and heavy bureaucratic processes that would weigh down projects, mobilize the energy of actors on the ground and increase costs to the detriment of action.

We are convinced that carbon finance can be a factor for progress if it supports projects that are truly transformative. It can help mobilize financial, technical, and human resources for large-scale projects over long periods. Let’s make sure that the “good wheat” does not get mixed up with the “bad wheat”.

This blog was originally published on the Livelihoods website.

World faces a major “Gigaton Gap” on finance for forests, new research says

To get back on track to meet global 2030 targets for forests, a new study is calling for a “bold” new public and private commitment to a floor price of $30-$50 per ton for high-integrity forest carbon credits, and accelerating upfront finance to forest countries for REDD+.

  • A new report finds that for 2030 forest goals to remain within reach, we need to achieve the milestone target of one gigaton milestone of emissions reductions from forests by 2025, plus another gigaton yearly after that.
  • We are not on track to meet this milestone. Just one-quarter of the necessary commitments have been made to date, and only half of these of these commitments have reached the stage of signed emissions reductions purchase agreements. And none of the committed funding has yet been disbursed.
  • Report authors also call for more direct carbon finance to Indigenous groups and women.

November 7, 2022 / A report released today by the UN-REDD Programme, UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and the Green Gigaton Challenge (GGC) says finance for forests is still insufficient to keep global warming below 2 degrees Celsius, the primary goal of the Paris Agreement.

Its authors call for a strong forest carbon price signal and more upfront finance to encourage countries to invest more in forest protection.

The COP27 climate talks, which began yesterday in Sharm El Sheikh, Egypt, are continuing last year’s talks in Glasgow, Scotland, an event marked by a slew of high-profile climate commitments from governments, companies, investors, and philanthropy.

The Glasgow Leaders’ Declaration on Forests and Land Use was one such pledge. One hundred and forty-one countries representing more than 90 percent of the Earth’s forests signed on to “halt and reverse forest loss and land degradation by 2030” while at the same time transforming rural economies and promoting sustainable development. Signatories emphasized forests’ crucial role in climate change mitigation, and the need to ratchet up ambition: at present, countries’ existing commitments to cut emissions fall 15 gigatons per year short of what’s likely needed by 2030 to limit global warming to no more than 2°C. Forests can help close that gap by an estimated four gigatons. But the window to act is closing.

“The window is closing” to meet 2030 targets for forests

The Green Gigaton Challenge coalition has proposed an interim milestone of financing commitments to deliver one gigaton of emissions reductions from forests by 2025, and another gigaton yearly after that. Meeting this milestone would keep the 2030 target within reach.

But report authors say we are still falling short. Just one-quarter of the necessary commitments have been made to date, and only half of these of these commitments have reached the stage of signed emissions reductions purchase agreements. And none of the committed funding has yet been disbursed.

“We are running out of time to achieve the urgent milestone of achieving commitments for one gigaton of emissions reductions from forests by 2025,” said Judith Walcott, Senior Safeguards Specialist at UNEP-WCMC and lead author of the new report.

“There is no Paris Agreement and no Sustainable Development Goals without forests,” said Susan Gardner, Director, Ecosystems Division, UNEP, speaking on behalf of the Green Gigaton Challenge. “As UNEP’s Emissions Gap Report reminded us once again, the window is closing and we urgently need to scale up action and finance for forest-based mitigation to achieve the 2025 one gigaton milestone and avert catastrophic climate change. If we succeed, and the new Forest and Climate Leaders Partnership is a promising sign of ambition, then vital targets for climate and nature remain within reach.”

Higher carbon credit floor prices and more upfront finance needed

To close the “Gigaton Gap,” report authors say “an unmistakable incentive in the form of an increased forest carbon price is needed… A bold first step, like committing to a floor price of $30-50 per ton of CO2e for a substantial volume of emissions reductions, would empower forest countries to transform their economies and catalyze further funding opportunities.”

The report also calls on the climate finance community to ensure that forest countries have “straightforward access” to upfront finance enabling them to prepare for and implement actions to reduce emissions from deforestation and degradation, which would then allow them to receive results-based payments for emissions reductions, via a mechanism known as REDD+ which is overseen by the United Nations Framework Convention on Climate Change.

“Currently, finance for forests does not reflect the urgency or the scale of the problems we are facing. Upfront investment in REDD+ readiness and implementation must continue and be scaled up to ensure capacity and action to achieve emissions reductions results, with effective measurement, verification and reporting systems and safeguards in place,” said Andre Guimaraes, Executive Director, Amazon Environmental Research Institute (IPAM).

The report finds that even if countries make it past early hurdles, few long-term, predictable options to access results-based financing exist. Authors documented at least $1.7 billion committed to pay for emissions reductions between 2020-2025 at the jurisdictional scale (Table 1). Just over half of this are Emissions Reduction Purchase Agreement (ERPAs) signed with the Forest Carbon Partnership Facility’s Carbon Fund. Another quarter of total commitments have been made through the LEAF Coalition. And commitments made in the form of either a Joint Declaration of Intent or Letter of Intent comprise the remainder.

Additional upfront readiness and implementation finance could be secured not only from traditional bilateral and multilateral sources, but also through blended public-private instruments and from private financial institutions such as pension funds and philanthropic institutions, which authors say are in a better position to provide long-term financing than private sector corporations or national governments. Green bonds and debt-for-nature swaps are other possible sources of finance.

The report also notes that voluntary carbon markets will have a role to play. Ecosystem Marketplace data cited in the report show that nearly $1.7 billion in transactions for forestry and land use projects took place in 2021 in the voluntary markets, representing more than 285 million tCO2e.

“No progress without equity”

Once finance is mobilized, it will be crucial to have strong integrity mechanisms and safeguards in place to ensure that emissions reductions are achieved.

“With serious action and incentives, we can get there, but progress also hinges on equity – fair and inclusive access to funding and capacity building. This will be crucial to achieving forest-centered emissions targets,” says Walcott.

“There is no progress without equity. Indigenous peoples and local communities are on the front line, leading the way with conservation and sustainable management of forests, but their lives are often at risk. Direct access to funding at sufficient volumes should be guaranteed for indigenous peoples and local communities as true partners, and with a focus on women”, said Lola Cabnal, Asociación Ak’Tenamit.

Forests key to “flattening the curve” of decarbonization costs

Ultimately, the price per ton paid under REDD+ mechanisms isn’t high enough, according to the report. Current prices range from $5-10 per tCO­2e, which the GGC says are too low to effectively function as an incentive for forest protection when lined up against revenue flows from alternative land uses like clearing for agriculture.

They call on public and private climate funders to commit to a floor price of $30-50 per ton of CO2e.

“This commitment would incentivize investment to help overcome the barriers of achieving sustainable development alongside forest mitigation,” report authors write. “The public demand signal would also provide reassurance to private actors and catalyze their further (and scaled up) commitments to pay for emissions reductions. An attractive price of forest carbon combined with reasonable certainty of future payments would also go a long way to attracting upfront finance for REDD+.”

Such a major jump in forest carbon credit prices is still a bargain compared to alternative emissions reductions strategies.

“REDD+ can contribute trillions of dollars in value by ‘flattening the curve’ of the global economy’s costs of transition to climate stability—opening up the opportunity to achieve tighter emissions targets and to maintain total emissions consistent with a 2°C budget while keeping the global carbon price below $250/tCO2e by 2050,” writes Rupert Edwards, Senior Finance and Carbon Advisor at Forest Trends, a founding member of the GGC. “Without the higher end of REDD+ supply potential, any tightening of ambitions would lead to a quick escalation in carbon prices.”


The report and its findings will be presented on November 11, 3:30pm at the Nature Zone event “Making good on the Glasgow Climate Pact: a call to action to achieve one gigaton of emissions reductions from forests by 2025”.


Editor’s note: Ecosystem Marketplace is an initiative of Forest Trends, a founding member of the Green Gigaton Challenge. Forest Trends and Ecosystem Marketplace contributed analysis and review to this report.

9 Things to Know About National Climate Plans (NDCs)

Please note this article was originally published by the World Resources Institute:

As countries prepare to gather at COP27 in Sharm el-Sheik, Egypt to advance the Paris Agreement on climate change, attention turns once again to its building blocks: countries’ 2030 climate commitments, known as nationally determined contributions (NDCs).

While the Paris Agreement established three global goals — limit global temperature rise to well below 2 degrees C (3.6 degrees F) and ideally 1.5 degrees C (2.7 degrees F), promote adaptation and resilience, and align financial flows with low-emissions, climate-resilient development — NDCs are the foundation. In its NDC, each of the Paris Agreement’s 194 Parties must lay out its aims to reduce emissions. Many also include plans for adapting to climate impacts and the financial requirements needed for implementation.

Countries must strengthen their NDCs on a regular, five-year cycle. Most submitted their initial commitments in 2015 and updated them by 2021. A new, stronger round of NDCs is due in 2025.

WRI’s Climate Watch platform tracks more than 200 indicators on all NDCs. The new State of NDCs report analyzed this data to draw out key trends and evaluate where the NDCs now stand. The key takeaway? Countries are making incremental progress on strengthening their NDCs, but what we really need to achieve the goals of the Paris Agreement is urgent transformational change.

Here’s what we know and what countries should keep in mind as they formulate new NDCs by 2025:

1) Despite some progress, countries must reduce emissions at least 6 times as much as current pledges.

The Intergovernmental Panel on Climate Change (IPCC) finds that global emissions must fall by at least 43% from 2019 levels by 2030 to align with the 1.5-degree C goal. By contrast, the current NDCs will only reduce global emissions by about 7% from 2019 levels. While this represents a 5.5 GtCO2e reduction compared to the initial NDCs — nearly equivalent to eliminating the annual emissions of the United States—countries will need to reduce emissions by 6 times as much to align with 1.5-degree C pathways.

While more countries have now set GHG reduction targets than in the initial NDCs and countries have expanded their targets to cover more sectors and types of greenhouse gases, the emissions impact of these improvements has been modest.  More than 85% of the improvement has come from large countries ratcheting up the stringency of their targets as opposed to adding new targets or expanding targets to cover new sectors and gases. Finding ways to accelerate ambition is paramount to the success of the Paris Agreement.

Mitigation Ambition in New and Updated NDCs Relative to Initial NDCs

2) Countries are strengthening adaptation plans, but progress must speed up and expand.

In the current round of NDCs, countries nearly doubled the number of priority adaptation actions compared to their initial NDCs. These actions show improved coverage of sectors and systems for adaptation, with a strong focus on food and nutrition security, water and nature-based solutions. Current adaptation plans also include a stronger emphasis on equity than previous NDCs, with greater consideration of gender concerns and inclusion of Indigenous Peoples.

Yet more work needs to be done to implement adaptation at the speed and scale the climate crisis demands. Few countries’ NDCs include timeframes or indicators for implementation of adaptation plans, and less than half of current NDCs include adaptation monitoring, evaluation and learning, elements critical for ensuring that planned interventions translate into on-the-ground action.

Time Frames and Indicators Identified for Priority Adaptation Actions in the NDCs

3) Current levels of climate finance are insufficient for implementing even a subset of NDCs. 

While countries are not required to report their climate finance requirements in NDCs, 53% (89 countries representing 50% of the global population), all of which are developing countries, included an estimate for how much money they’ll need to implement their plans. These countries say they’ll need $4.3 trillion: $ 2.7 trillion for mitigation; $1.1 trillion for adaptation; and $475 billion unspecified.

Importantly, 51 countries’ stated needs amount to a total of $1.5 trillion to achieve their “conditional” NDC pledges, those contingent on receiving international finance to implement mitigation and adaptation plans. This figure dwarfs the promise by developed countries to provide $100 billion annually to developing countries by 2020 to support their climate actions — a target they’ve yet to meet. A new collective finance goal to go into effect after 2025 is currently under negotiation. Finance estimates from the 89 countries providing them underscore the need to mobilize significantly greater resources to implement NDCs.

Climate Finance Requirements in Current NDCs

4) Around 50% of developing countries include loss and damage in their NDCs.

Roughly the same number of countries refer to current or future costs of loss and damage — the consequences of climate change that go beyond what countries can adapt to — in their current NDCs compared to the first round. However, more countries are including information on loss and damage topics, such as slow-onset events, climate-induced migration, and provision of finance and capacity-building for loss and damage. This suggests that countries may prioritize elements of loss and damage even if they do not include cost figures in their NDC.

Additionally, Small Island Developing States (SIDS) are increasingly including loss and damage costs and related topics in their NDCs, suggesting that the most climate-vulnerable countries are prioritizing this information. Additional support for countries to analyze trends in loss and damage — including use of climate scenarios — and approaches for addressing it such as comprehensive risk management could improve this information in future rounds of NDCs.

References to Loss and Damage in the NDCs

5) 81% of NDCs seek to increase renewable energy, but few explicitly aim to reduce fossil fuel consumption.

In addition to economy-wide targets to reduce greenhouse gas emissions, most NDCs contain sector-specific measures. Those promoting renewable energy are among the most popular – 136 NDCs contain measures to boost renewable power, and more than half of these contain quantified renewable energy targets.

But limiting warming to 1.5 degrees C also requires slashing fossil fuel consumption dramatically, and far fewer NDCs explicitly address this. Only 51 contain measures pertaining to fossil fuel consumption, and a mere eight contain measures to phase out or phase down fossil fuel consumption.

Number of NDCs with Different Types of Renewable Power Generation Measures

6) Most NDCs include measures addressing forests and land use, but quality varies.

More than 140 NDCs contain measures to protect standing ecosystems, manage working lands to reduce emissions and/or restore degraded ecosystems. Seventy-eight NDCs contain measures in all three categories.

The quality of these measures, however, varies widely. Only just over half of NDCs have quantifiable targets related to land use and forestry, and very few incorporate critical measures such as financial needs and the rights of Indigenous Peoples and local communities.

NDCs Containing LULUCF Targets and Measures

7) NDCs prioritize electric mobility but don’t include other critical measures to reduce transport emissions.

A holistic approach to reducing emissions from transport includes avoiding unnecessary vehicle travel, shifting to efficient travel modes, and improving vehicle and fuel efficiency. The current NDCs have embraced vehicle improvements by promoting electric transport. Such measures more than doubled from the initial to the current NDCs.

The enthusiasm for electric mobility, however, was not matched by growth in other critical transport-related measures. Less than half of NDCs contain public transport measures. And active transport and low-carbon freight, shipping and aviation appear in only a handful of NDCs.

The next round of NDCs should ensure balanced attention to measures that avoid unnecessary travel, shift to sustainable travel modes, and improve vehicles, taking into account both passenger and freight sources.

(Learn more about transport in NDCs in WRI’s research paper, Sustainable Urban Mobility in the NDCs: The Essential Role of Public Transport.)

Number of NDCs Containing Different Types of Transport Measures

8) Only 15 of the 119 Global Methane Pledge signatories include a specific, quantified methane-reduction target in their NDCs.

Countries committed to the Global Methane Pledge, launched at COP26 in Glasgow in 2021, agreed to collectively reduce global methane emissions by 30% from 2020 levels by 2030. While around 80% of signatories include methane under the umbrella of their economy-wide GHG reduction targets, far fewer (only 15) include quantified methane-specific targets in their NDCs. This makes it challenging to determine how the collective Global Methane Pledge target will be met.

The next round of NDCs offers an opportunity for Global Methane Pledge signatories to spell out how they will contribute to the collective 30% reduction in methane emissions by 2030.

Methane Coverage in the NDCs from Global Methane Pledge Signatories

9) NDCs increasingly recognize the importance of a just transition.

As support for just transitions rise up the agenda for the UNFCCC, so too has its recognition in countries’ NDCs. The idea of a “just transition” is to reduce the negative impacts on workers, communities and value chains of transitioning to a zero-carbon economy while also ensuring that the benefits are fairly distributed.  Explicit attention to the idea in the initial NDCs was almost non-existent, only appearing in South Africa’s plan. In the current NDCs, 32 mention a just transition, although at varying depth. Some briefly mention the concept — such as Mauritius and Iceland — while other parties —such as South Africa, Antigua and Barbuda — have more fully incorporated the concept, with paragraphs or dedicated sections on just transition. The next round of NDCs, in addition to national policies, can spell out these efforts more fully.

The First Year in Which Countries Mentioned "Just Transition" in Their NDCs

What’s Next for Countries’ Nationally Determined Contributions (NDCs)?

As agreed at COP26 in Glasgow, countries are expected to continue strengthening their NDCs this year. But in the lead-up to COP27, progress appears to have reached a plateau.

As countries develop new plans in advance of 2025, it will be important to deliver not just incrementally more ambition, but an entirely different scale of ambition and a clear sense of the transformations countries will pursue.


Shades of REDD+
Beyond carbon – evaluating the sustainable development co-benefits of carbon projects

11 October 2022 | Thousands of carbon projects claim to positively contribute to SDGs beyond reducing or removing greenhouse gas (GHG) emissions. However, until very recently, there was no way to assess such claims and compare carbon projects according to their positive contribution to SDGs. In this context, Calyx Global’s SDG rating of carbon projects is marking a milestone toward a carbon market that values GHG mitigation and the broader co-benefits of carbon projects.

As of October 2022, Calyx has reviewed 117 projects with certified SDG contributions and can report the first findings. For example, projects that involve communities and focus on nature-based solutions show a higher likelihood of additional SDG impacts. Projects that are often more time-consuming to implement because they focus on improving livelihoods, in addition to climate challenges, are also more likely to generate additional SDG outcomes. The SDGs – other than SDG13 on Climate action- that are claimed most often by projects are SDG8 (Decent work and economic growth) and SDG15 (Life on land). While it is not surprising that projects that promote nature-based solutions claim SDG15 outcomes, the contribution of carbon markets to job creation is a little-known fact. Projects also use different methodologies to assess and report on SDG contributions, with cookstoves projects being more likely to follow a clear methodology to quantify outcomes (SDG 3 Good health and well-being) than other project types.

Why quantify SDG contributions of carbon projects?

The driver behind investments into carbon projects is the intent to generate GHG emission reductions and removals. The quality of carbon projects is first and foremost measured by how effectively they reduce or remove GHG emissions. High-quality carbon projects must also avoid harm to the planet and people. However, taking such a narrow view of carbon projects disregards the multi-dimensional positive impacts carbon projects can have on societal well-being and the planet. Limiting carbon projects to reducing emissions is like limiting agriculture to producing calories: Without considering agriculture’s many roles – such as ensuring prosperous livelihoods and landscapes, healthy soils and biodiversity, humanely-treated animals, and nutritious and balanced food – much of its essence, value and beauty is lost.

Sustainable carbon projects with long-term positive impacts take an integrated view across multiple outcomes. They maximize benefits ranging from reducing poverty and ensuring access to clean energy and water to enhancing biodiversity and coastal ecosystems. Projects that score high across multiple SDGs yield significantly more benefits than simple carbon projects. Such projects may often be more expensive in their design. Still, they are likely to enjoy broader support in local populations and thus be sustained much longer. In other words, they are more worthwhile projects that require additional investments.

Calyx Global’s rating of SDG contributions of carbon projects is also in line with proposals by entities such as the Integrity Council for Voluntary Carbon Market (IC-VCM) to tag carbon credits to highlight particular features of carbon credits. The IC-VCM consultation draft also requires carbon-crediting programs to incorporate guidance and provisions on using standardised tools and methods to assess the SDG impacts of mitigation actions and ensure a net positive SDG impact from carbon projects.

Who certifies SDG-related claims?

Calyx Global provides an SDG impact rating for projects that distinguish themselves by receiving an SDG certification through, for example, Verra’s Climate, Community and Biodiversity or Sustainable Development Verified Impact standards or the Gold Standard for Global Goals. These carbon-crediting programs offer a process for projects to measure and report SDG outcomes, including validating, monitoring, and verifying such outcomes. While most projects choose the route of attaching an SDG “label” to a carbon credit, both Verra and Gold Standard also offer, in theory, issuance of tradable SDG assets.

The credibility of SDG-related claims depends greatly on the credibility of the certifying standard and its governance – which constitute a logical first step for Calyx’s review of SDG claims. However, in the end, the SDG merits in scale and depth are project and investment-specific. Therefore, assessments of SDG impacts must look at each project individually and value SDG contributions at a granular level – while applying a standardized assessment methodology.

How to assess projects’ contribution to SDGs?

Calyx Global has developed a project-level SDG assessment that identifies SDGs to which a project claims to have contributed and assesses the degree to which these contributions can be attributed to the project as well as the depth and durability of those contributions. SDG contributions are tangible actions that projects claim, report on, and verify by third-party audits. Providing such a rating of projects according to their SDG contributions requires a standardized evaluation of claims that relate to nature, ecosystem, and well-being across an infinite diversity of project contexts.

This evaluation is not an easy task and has to overcome several challenges. A first barrier is the country-centric nature of UN SDG targets and indicators that were developed and are mostly measured at a global and national level. They are not always aligned with project-level interventions. It was, therefore, essential for Calyx Global to relate project activities to SDG targets. The chosen methodological approach allows mapping project interventions and activities to SDG targets to determine under which SDGs a given project’s contribution can be framed.

Calyx Global’s project assessment framework has been developed in reference to a methodology that Robert Müller and Thijs Merton have developed for the Fair Climate Fund. It rests on two pillars that ensure that projects make long-term contributions to SDGs:

  1. The benefit project claims can be attributed to the project activities. The level of assurance that a specific SDG contribution has occurred due to project activities depends on two factors. First, the contribution is predicted or actual. Second, it is described, estimated, or quantified using a clear methodology. The assessment framework checks if this is the case for each SDG contribution by a project.
  2. The benefits brought about by projects are deep and durable. For each SDG contribution identified, the assessment evaluates the level of change achieved by the project. In project results chains, project activities may lead to outputs, i.e. services or products delivered. These services or products can improve people’s lives and planetary health if they are taken up and used. Calyx evaluates whether the reported project contributions are at the level of output, outcome or impact hence gauging the long-term benefits of the project and its contribution to sustainable development.

The figure below summarizes the assessment methodology.


Approach to assessing and rating SDG contributions at the project-level

What remains to be done?

While Calyx is pioneering SDG ratings, more remains to be done to fully capture the SDG value of projects. For one, it is hard to assess the SDG impact of carbon projects until projects have reached a certain maturity. Another challenge is differentiating between SDG outcomes and impact at scale (i.e. impact per credit) and smaller-site specific SDG results. In many cases, the information provided by project developers also is scant, with gaps that make assessing outcomes difficult. Standards that certify SDG claims can do more to ensure their clarity and quality. For example, they can introduce more robust methodologies for baseline assessments, quantifying SDG impacts, and requirements and guidance for projects monitoring and reporting impacts.

Where are we hoping to take this?

A mature carbon market should be able to trade and value attributes beyond carbon. Indexed assets that standardize SDG contributions will allow buyers to formulate purchase orders with a minimum level of rated SDG contribution, which will help channel investments into projects that maximize carbon and SDG benefits. In this context, a robust SDG rating can help increase the overall confidence in carbon markets. Host countries will feel more confident about the local benefits of carbon projects. Buyers can reduce reputational risks. Most importantly, local community and ecosystems can fully enjoy their participation in global carbon markets.

The authors of this blog form part of Calyx Global’s independent oversight through its independent panels. The SDG Impact Panel brings together experts, including academics and practitioners, on climate change, carbon projects, and sustainable development to combine their knowledge and guide the SDG assessments of Calyx.

London Stock Exchange Launches its Voluntary Carbon Market Rules

10 October 2022 | After nearly a year since first announcing that it would be developing a new market solution to accelerate the availability of financing for projects that will support a just transition to a low-carbon economy, the London Stock Exchange today launched its public market framework. The Exchange’s goal is to stimulate the scaling of the global voluntary carbon market through capital at scale and transparency through disclosure.

According to the London Stock Exchange Voluntary Carbon Markets website, the “Voluntary Carbon Market will enable funds and operating companies to raise capital to be channelled into projects that contribute to reducing the amount of greenhouse gases in the atmosphere, both nature-based and technology led, and that are expected to generate carbon credits… [it] is designed to support corporates who seek to offset their residual or unavoidable emissions on their net-zero journey and provide exposure for investors to an asset class, with a long-term supply of carbon credits.”

What is the Voluntary Carbon Market designation?

The designation may be applied to qualifying Funds or Operating Companies that are admitted to the Main Market or AIM and are intent on investing into climate change mitigation projects that are expected to yield carbon credits.

How will London Stock Exchange’s Voluntary Carbon Market work?

Watch this explainer video

Learn more with the factsheet:
Access application forms, admission and disclosure standards:

Decarbonizing and de-risking commodity supply chains: It’s a package deal

Corporate commitments to eliminate deforestation from commodity supply chains really took off in 2014 with the New York Declaration of Forests. It had become increasingly clear that commercial agriculture – namely soy, palm oil, cattle, and timber – was behind the majority of deforestation. Today, anti-deforestation commodity commitments cover $96.8B in export value.

In parallel, net zero emissions commitments by companies have also surged. Thousands of companies and financial institutions have pledged to halve emissions by 2030 and reach net zero by 2050.

These two sets of commitments evolved separately, and have tended to be managed separately, even by companies that have pledged to achieve both zero-deforestation supply chains and net zero emissions targets.

New guidance released today brings the two together, for aligned corporate action on deforestation and land use change emissions.

From a practical standpoint for companies, it makes a great deal of sense to link these two issues. The authoring organizations, the Accountability Framework initiative (AFi), the Science Based Targets initiative (SBTi), and the Greenhouse Gas Protocol (GHG Protocol), rightly point out that addressing deforestation and emissions related to land use change “both require companies to follow the same set of processes: i. setting goals and targets to eliminate land use change associated with their operations and supply chains; ii. measuring and accounting for that land use change at multiple scales; and iii. disclosing performance and progress.”

It also makes sense in terms of moving the needle on emissions: as much as 90% of a company’s carbon footprint comes from its “Scope 3” emissions. (Scope 3 emissions are from activities or assets a company doesn’t have direct control over in its value chain, like upstream sourcing and downstream consumption. Scope 1 emissions are direct emissions; Scope 2 are from emissions from energy use.)

Scope 3 emissions have long been the “dark matter” of climate disclosure. We just released analysis showing that though they make up the vast majority of emissions, less than half of companies report data on Scope 3, leaving a major gap in understanding and reporting climate impacts associated with land-use change.

Historically Scope 3 emissions have been overlooked – until now.

Expect to hear a lot more about Scope 3 in the coming months. Investors are starting to focus on them and ask companies for more data. The International Sustainability Standards Board and the US Securities and Exchange Commission have recently drafted disclosure requirements for Scope 3. (Though Republicans are pushing to scrap the SEC disclosure requirements on the grounds that reporting on Scope 3 is too complex.)

Action on Scope 3 would have enormous impact for climate and ripple across the global economy. (One company’s Scope 3 emissions are another’s Scope 1 emissions after all.)

Since deforestation upstream in the value chain is behind such a large share of Scope 3 emissions for everyday consumer goods, action on Scope 3 is also a very, very big deal in the fight to protect forests and other carbon sinks.

We remember well the energy in New York in September 2014 during Climate Week, when the New York Declaration on Forests was launched with great excitement. The NYDF pledged signatories to halving deforestation in supply chains by 2020, and eliminating it by 2030. Virtually no one achieved the 2020 goal. We all underestimated how difficult it would be.

Now we are realizing that climate safety and protecting our planet’s forests are a package deal. We’ll achieve both, or neither.


Opinion: ESG falling short? Low carbon funds overvalued? High integrity carbon credits offer a bridge to net zero finance

  • Carbon credits can provide flexibility for more efficient and impactful use of capital where low carbon portfolios are overvalued or if ESG strategies are failing to deliver meaningful climate change mitigation. 
  • The financial sector’s transition to net zero should include widespread use of high integrity carbon credits (1), as a supplement to robust decarbonization targets for investment and lending. 
  • High integrity carbon credits provide opportunities for Financial Institutions to optimise the financial performance and environmental impact of carbon constrained portfolios and net zero strategies. 
  • Supporting natural climate solutions through the voluntary carbon markets enables Financial Institutions to act as a direct transmission mechanism for achieving the goals of the Paris Agreement. 

Finance’s net zero conundrum 

The Paris Agreement’s Article 2.1(c) describes “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” However, efforts by Financial Institutions (FIs) to decarbonize portfolios are hamstrung by their inability to exercise direct control over the greenhouse gas emissions of companies to which they provide finance. 

FIs have some tools at hand: they can engage with companies and advocate for regulatory changes to push for progress on low carbon goals.  And the Science-Based Target Initiative (SBTi) is developing standards for sectoral decarbonization, portfolio coverage and temperature ratings that will allow for evaluation of “net zero by 2050” pledges.(2

The concept of the “value-carbon frontier” 

However, the fiduciary responsibility to maximise returns means that institutional investors inevitably struggle to decarbonize investments beyond a level implied by the efforts of public policy and the real economy. As the UN Convened Net-Zero Asset Owner Alliance has stated: “To achieve net-zero investment portfolios by 2050, governments [emphasis added] must implement policies that drive the transition to a low-carbon economy.”(3)

Constructing net zero portfolios by tilting towards low-emitters and those best-in-class carbon-intensive companies transitioning to net zero has also been easier said than done. From 2016 through 2020, MSCI found that that less than a quarter of MSCI ACWI Investable Markets Index constituentsdecarbonized by at least 10% per year, making it virtually impossible to build broad global equity portfolios of decarbonising companies during this period, and thus raising difficult questions around accountability for achieving targets.(4)

Research from Dutch asset management firm Robeco has demonstrated empirically how attempting to increase carbon footprint reduction beyond a certain level has an adverse effect on the performance of a value investment portfolio strategy. They showed that carbon taxes up to US$100 per metric ton of CO2 equivalent, corresponding mathematically with a portfolio carbon footprint reduction of about 50%, had little effect on the characteristics and the performance of the long side of an EBITDA/EV value strategy for MSCI World stocks. However, to increase the carbon footprint reduction to 70%, the assumed carbon tax would need to rise from US$100 to an unrealistic ~US$5,000.(5) 

There are, therefore, real economy constraints which result in a “value-carbon frontier” beyond which reducing the carbon footprint sacrifices financial returns in a broad-based investment portfolio. 

When ESG fails to deliver and low carbon funds are over-valued 

ESG funds (as opposed to low carbon funds) have faced a barrage of criticism in recent months, from the mild: that the acronym ESG jams together disparate and sometimes contradictory objectives;(6) to the damning: that the sector is rife with greenwashing and at risk of a miss-selling scandal,(7) or that funds offer little if any environmental benefit and cause actual harm by misleading investors into thinking they are addressing climate change when they are not.(8) 

Genuinely low carbon strategies and investing directly in climate solutions are, of course, an effective way to reduce carbon footprints and to allocate capital to climate change mitigation. They do, however, concentrate risk in a small number of sectors, thus risking financial underperformance.  Forest Trends argued in February 2021 that while continued climate policy tightening should create a positive secular trend for low carbon investments, low carbon strategies could become expensive (either because policy is insufficiently ambitious or because flow of funds into low carbon products drives valuations too high).  

Since then, clean energy indexes have underperformed dramatically compared to the traditional energy sector: a 17.39% loss for the MSCI Global Alternative Energy Index in 2021 compared to an increase of 41.77% for the MSCI World Energy Index and 22.35% for the MSCI World Index.(9) JPM Asset Management’s Annual Energy Review for 2022 expected this trend to continue through 2022.(10) And in the year to 31st August 2022, the Global Alternative Energy Index was down 7.4% compared to an increase of 35.7% in the World Energy Index. 

High integrity carbon credits as a bridge to net zero 

Both investment managers and retail investors need the flexibility to switch out of green assets if they perceive them to be overvalued. Moreover, the sectors where emissions are hard to abate remain critical to economic growth and the transition to a carbon neutral economy. Investments in some carbon-intensive companies represent both an opportunity to finance businesses leading the way to net zero and at the same time achieve superior returns. In these scenarios investors can hold more carbon intensive portfolios and pay for credits to maintain the same carbon footprint or pay extra to achieve net zero today.(11)

The table below shows the emissions (Scopes 1, 2 and 3) associated with a range of MSCI indexes measured as tons of CO2 equivalent per $ Million of Enterprise Value including Cash (EVIC), as at the end of August 2022. At what would currently represent a high carbon credit price of US$20, the leading MSCI ACWI index would cost 0.77% per annum to offset, the Global Alternative Energy Index 0.30% and the World Energy Index a much higher 5.15%.

However, the World Energy Index outperformed the Alternative Energy Index by 59% in 2021 and 43% in the year to 31st August 2022. Assuming a carbon credit price of $20 tCO2e, the outperformance in 2021 would have been sufficient to fully offset the difference in carbon footprint between the two indexes for fourteen years and the outperformance in the last twelve months sufficient to offset the difference for around nine years. 

Carbon credits can therefore be used both to achieve net zero earlier than 2050 and to optimise the financial performance of carbon constrained investment strategies, representing a more efficient and impactful use of capital if low carbon portfolios are overvalued or if ESG strategies are failing to deliver meaningful climate change mitigation versus non-ESG benchmarks. 

The potential of financial institutions as a direct transmission mechanism for Paris goals  

High integrity carbon credits can allow FIs not only to follow corporate best practice but directly to support critical climate change mitigation actions.  

It will be impossible to stabilize global warming below 2°C without offsets and negative emissions such as Natural Climate Solutions (which offer up to 30% of the GHG mitigation required).(12) Commitments to pay for carbon credits from FIs (as well as corporates) could enable donor governments and multilateral institutions to leverage massively more private co-funding for climate aid in developing countries and to unlock high integrity credit supply pipelines through initiatives such as the LEAF Coalition.(13)

The Natural Climate Solutions Alliance convened by the World Economic Forum and the World Business Council for Sustainable Development has developed an NCS Investment Accelerator, supported by several corporates, which aims to go beyond internal decarbonization trajectories by investing in high integrity credits to offset residual emissions on an annual basis.(14)  FIs and their ethically oriented clients can do the same. Indeed, use of carbon credits by FIs would reinforce competitive pressure for corporate action, not least because FIs would have no need to offset the carbon footprint of investee companies which have already offset emissions beyond their value chain.  

Supporting the development of a liquid market in high integrity carbon credits could allow FIs to go beyond the “value-carbon frontier” in global financial markets implied by policy signals in the real economy, and to act as a direct transmission mechanism for achieving the goals of the Paris Agreement. 


(1) For detail on what constitutes “high integrity” see:
The Tropical Forest Integrity Guide
The Integrity Council for the Voluntary Carbon Market
(2) Financial Sector Science-Based Targets Guidance Version 1.0 February 2022.
(3) UN Convened Net- Zero Asset Owner Alliance. Position Paper on Governmental Carbon Pricing. June 22
(4) MSCI. Constructing Net-Zero Portfolios: Three Approaches. September 2021.
(5) Robeco. December 2021. Factoring carbon taxes into a Value strategy
And see: Blitz, D., and Hoogteijling, T., November 2021, “Carbon-tax-adjusted value”, working paper.
(6) Financial Times. Jonathan Guthrie. April 2022. ESG is a category error that needs unbundling
(7) Financial Times. Laurence Fletcher and Joshua Oliver. February 2022. Green investing: the risk of a new mis-selling scandal ;
(8) Tariq Fancy. The Secret Diary of a Sustainable Investor.
(10) JPMorgan Asset Management Annual Energy Review 2022
See also
It’s Not Easy Being Green: Why Is ESG Underperforming In 2022? Taylor Tepper. Forbes Advisor.
Divesting fossil fuel stocks? That’s so last year. Merryn Somerset Webb. Financial Times. February 2022
(11) The Net Zero Transition and Offsetting of Carbon Intensity in Retail Investment Portfolios. Rupert Edwards. Forest Trends
(12) Griscom et al. 7 January 2020. National mitigation potential from natural climate solutions in the tropics
(14) NCS Alliance Investment Accelerator

Achieving Deforestation Free Corporate Supply Chains Remains a Challenge

September 12, 2022 – Supply Change (SC), a non-profit initiative of Forest Trends, has published a two-part series explores corporate progress on their sustainability commitments and supply chain management since 2020. The latest publication, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020, offers a comprehensive evaluation of 125 leading consumer brands and retailers’ efforts to end commodity driven deforestation in the production or supply of forest-risk commodities including cattle, cocoa, palm oil, soy, timber, paper and pulp. 

About Supply Change: Forest Trends’ Supply Change Initiative draws from publicly available data to track a global set of companies, representing all levels of the supply chain from producers to retailers, and their commitments to address commodity-driven deforestation. SC compiles all research in a sophisticated database management system of over 900 companies that enables the generation of insights within cattle, cocoa, palm oil, soy, timber, paper and pulp supply chains. 

Over the next five years (2022–2027), SC will publish corporate and investor-tailored reports annually, summarizing key trends in the commitments, implementation and impacts of companies’ sustainable commodity commitments. They will identify trends in corporate sustainability commitments within key forest-risk supply chains that are emerging post-2020 and in addition to providing this “state of corporate deforestation commitments”, they will offer actionable information to enhance sustainable practices in corporate portfolios and mitigate potential reputational, operational, and market risks. 

Part one focused on corporate commitments and policies. In Part 1, Corporate Progress on No Deforestation and “Nature Positive” Post 2020, SC found that most companies had time-bound commitments to reduce forest loss, but many did not have sufficient systems to implement their commitments, including comprehensive risk assessment processes and greenhouse gas (GHG) emissions measurement and mitigation strategies that included Scope 3 emissions.  

Despite maintaining a commitment for at least one forest-risk commodity, many commitments did not cover companies’ entire supply chains, and SC noted recurring issues with commodity coverage and the level of detail provided by companies. Overall, SC found that companies are working to understand and minimize the impacts of their commodity production and sourcing, but many are still falling short on key facets of sustainability reporting. 

Part two focuses on implementation, impacts and progress towards achieving commitments. In the second part of this two-part series, Corporate Implementation, Impacts, and Reporting on No-Deforestation & “Nature Positive” Post 2020,  SC builds on its previous findings to assess trends in the approaches used by companies to implement and disclose progress on their commitments. Trends discussed include companies’ approaches to monitoring, traceability, risk management, supplier engagement, progress reporting, and GHG emissions reporting. This report also highlights the implications of these trends and where there are opportunities for investors to encourage companies in their portfolios to adopt best practices for effective implementation and reporting.   

Above all, this reporting demonstrates that urgent action is needed to overcome persistent barriers to drive progress in fulfilling corporate sustainability commitments in forest-risk supply chains. Both companies and investors will have a pivotal role in the next five years in driving transformational change towards eliminating commodity-driven deforestation, reducing greenhouse gas emissions, and protecting human rights throughout their supply chains. 

For more information, please contact [email protected] 

Protecting One of the World’s Most Distinctive and Valuable Forests

10 August 2022 | Blue carbon and its many benefits are popular topics in discussions about how to address climate change. Many types of blue carbon projects hold tremendous potential for sequestering carbon and protecting their ecosystems, but they are not yet established, which has opened some debate about how impactful blue carbon can be in sequestering greenhouse gases at the scale we need.

There is, however, one type of blue carbon offset project that can be accurately, reliably and transparently measured in terms of emissions reductions. And it is critical for supporting local ecosystems and communities. It’s mangrove forests. This summer the Climate Action Reserve registered the first-ever mangrove forest project in Mexico, marking a significant milestone in demonstrating the impact and feasibility of this type of project.

To understand what this offset project type is and the value it brings, let’s look at the basics.

Mangrove forests are unique and distinct. They are found around tropical and subtropical shorelines and thrive in those salty waters, where other trees cannot survive. Their thick prop roots are twisted and complex, making them appear to stand above the water. Their roots also slow down water flow and allow sediment to collect. Because of these characteristics, mangrove forests are natural protectors and providers. They stabilize coastlines, reduce erosion and provide critical habitat for organisms.

Mangrove forests are critical to addressing climate change because they are excellent at storing carbon. In fact, mangrove forests are among the most carbon-dense ecosystems and can sequester four times more carbon than rainforests. Much of the carbon is stored in the soil collected beneath the mangrove trees.

Additionally, mangrove forests are critical for protecting against the current impacts of climate change by stabilizing coastlines and reducing erosion from storms, currents and tides.

Unfortunately, numerous issues are facing the world’s critical mangrove forests. The American Museum of Natural History (AMNH) describes mangroves as “among the most threatened habitats in the world.” Less than 50 percent of the world’s mangrove forests were intact at the end of the 20th century, and of those that remain, half are in poor condition.

Forces threatening mangrove forests include:

  • The conversion of wetland areas to artificial ponds by the aquaculture industry. Water is diverted away from the mangrove forests and waters are contaminated by chemicals, antibiotics and organic waste.
  • The conversion and destruction of mangrove forests for agricultural use.
  • The displacement of and damage to mangrove forests for coastal development of ports, docks, buildings, golf courses and marinas.
  • The logging of mangrove forests by charcoal and lumber industries.
  • Extreme weather, warmer air and water temperatures, increasing variability and intensity of rainfall, ocean salinity and other impacts caused by climate change.
  • Irresponsible tourism.

The Climate Action Reserve is working to protect and restore these unique ecosystems. The organization recently registered the first-ever mangrove forest offset project in Mexico. The Manglares San Crisanto/San Crisanto Mangroves project, which was registered under the Reserve’s Mexico Forest Protocol v1.5, is the first of its kind in Mexico. It includes three reporting periods, and an estimated 47,908 tonnes CO2 have been removed by the project.

The Reserve’s Mexico Forest Protocol encourages the protection, improved management and restoration of mangrove forests through the issuance of offset credits for additional emissions sequestration activities above the baseline. Communities following the protocol receive economic incentives and resources to ensure that these coastal ecosystems provide greater benefits for surrounding communities and biodiversity, build greater resilience to the impacts of climate change and store more carbon to benefit the global climate.

As the first project of its kind in Mexico and also the first mangrove project registered with the Reserve, the San Crisanto Mangroves project is pioneering and demonstrates the ability of mangrove forests to become viable offset projects and support local communities.

For the San Crisanto community, the mangrove forest is central to the ejido (land managed communally) and the community members’ way of life, which is deeply connected to the mangroves through fishing, coconut plantation, salt production, protection of native animals and sustainable tourism. Prior to developing the project, the community had lost water flow to the mangrove forest, which resulted in the loss of fish, birds and biodiversity and the area was immensely deteriorated. While developing the project, the community recognized the importance of the mangrove forest to their existence. Their offset project provides them with continuity to their way of life.

According to Jose Ines Loria Palma, President of Fundación San Crisanto, the San Crisanto Mangroves project taught the community many lessons, including:

  • You have to take a proactive attitude towards life, not wait
  • You must have a very long-term sustainable development project
  • It is very important to learn and teach to respect nature
  • Capacity development is a very important success factor
  • Carbon and biodiversity are not merchandise; what is paid for is the preservation of life

ACR Updates Program Rules for Tokenization of Carbon Credits

August 11, 2022.   This  article was originally published on

LITTLE ROCK, Ark., May 30, 2022 – The American Carbon Registry (ACR), a nonprofit enterprise of Winrock International, has announced updated program rules, effective immediately, that prohibit the tokenization of ACR carbon offset credits unless explicitly authorized by ACR. The updated rules, detailed in the legal Terms of Use agreement with ACR account holders, are designed to protect carbon asset integrity, including by ensuring that ACR-issued credits are not double sold or used by more than one entity to make environmental claims.

Concerns about blockchain’s role in the carbon markets has been amplified in the recent months amid the swift emergence of a crypto carbon market, in which millions of carbon credits have been retired, tokenized and converted to cryptocurrencies.

“Over the course of the last year, we have been in discussions with a number of companies interested in utilizing a range of technologies to streamline the credit creation process as well as to create digital carbon assets such as tokens and carbon-backed cryptocurrencies. While interested in the opportunities that these and other digital technologies offer to create efficiencies in carbon measurement, monitoring, reporting and verification, and to democratize access to markets, we are committed to a rigorous assessment process to ensure that they don’t undermine the foundations of carbon market integrity,” said Mary Grady, the Executive Director of ACR.

“As things stand at the moment, we believe the new link between carbon markets and unregulated cryptocurrencies presents a reputational vulnerability that could jeopardize confidence in carbon markets at precisely the time we need scale and transparency for markets to help achieve Paris Agreement climate targets,” Grady added.

ACR’s newly announced rules are the first step in the development of a set of program guardrails to protect market integrity. Alongside its own efforts to understand the risks and opportunities, as well as what rules would need to be in place for the creation of digital carbon assets, ACR has participated in the International Emissions Trading Association (IETA) Council Task Group on Integrity in Digital Climate Markets, launched earlier this year, which seeks to ensure sound foundations for the integration of carbon markets with digital technologies. The task group has already issued a set of principles to ensure integrity in digital carbon market offerings.

Over the coming months, ACR will build on the IETA principles and collaborate with carbon market participants with the aim of establishing a common implementation roadmap to safeguard the structural, legal and environmental underpinnings of carbon markets, while optimizing climate impact and access to finance. This will include program rules to authorize the tokenization of credits; developing the required registry infrastructure to ensure transparency and avoid double selling and double claims; and the implementation of appropriate legal and regulatory considerations along the carbon value chain.

A ban on exporting carbon credits and its impact on the domestic carbon market

10 August 2022 | With the passage of the Energy Conservation (Amendment) Bill, 2022, the domestic carbon market is becoming a reality. However, this also brings in many question marks. The statement from the Hon’ble minister regarding restrictions on the export of carbon credits will be the major focal point in the planned launch of India’s carbon market.

There are few of the areas we must need to look into i.e, first as the Energy Conservation (Amendment) Bill, 2022 intends to bring in the energy segment under the carbon market, it appears that the export ban of carbon credit may be immediately impacting the credits generated from the renewable energy sector; many of which are of low-hanging fruits. Projects under the renewable energy segment, including wind and solar, may cease generating any carbon credits post-2020. The authority may propose a new framework which will make many of the existing low-hanging RE projects ineligible under the domestic carbon market. If permitted, it will immensely impact the sustainability of credits from PAT and REC, considering the current ambition of integrating PAT and REC under a new carbon market framework. Today in India, the demand for carbon credit from the voluntary market segment is very limited, and any policy flexibility of allowing low-hanging carbon credits at par withPAT and REC under the existing market segment; will pull the price of REC and ESCerts (Energy Saving Certificates) down. Thus, the policy framework should need to distinguish the credits from the different segments and create a pathway to integrate all the credits with a timeline of 5 to 10 years. Unless the proposed future carbon market framework is not flexible in accommodating voluntary carbon market standards, many projects under the voluntary carbon market standard will cease to exist. Thus, a significant testing phase will happen during the next few months to test the market’s fair, credibility and sustainability.

The second is on credits generated from forestry, waste management and transport sectors. Although the proposed bill limits renewable energy and energy efficiency sectors , it is clear that other sectors may need to pass through the same test of export ban considering India’s updated NDC targets reduction of emissions intensity of GDP by 45 per cent by 2030, compared to 2005 levels. These issues will be assessed during the next few months under the corresponding adjustment. The testing phase is how these sectors will be accommodated in the new future and under what provision.

The third point is what will be defined as a carbon credit in the context of India. As per the bill, “carbon credit certificate” means the certificate issued by the Central Government or any agency authorised by it under section 14AA. With the emergence of many voluntary carbon market standards and players and overnight new players declaring a new standard/platform/registry, it will be a critical phase to redraw the eligibility criteria for defining carbon credit certificates. The carbon market has failed due to credibility issues despite its novel intention, and thus the foundation of India’s carbon market has to be based on credible carbon credits. With Article 6.4 becoming the front runner in kick-starting the carbon market under Paris Agreement in the near future, and many of the CDM components may be the choice during this transition, India’s carbon market framework will also closely follow the safest pathway in following the multilateral framework and guideline aligning with A6.4.

The final point is that the message on the export ban of carbon credits may not have been intended for sectors where large investment is needed through carbon financing. However, the generalisation of the export ban statement in its spirit may hamper India’s current stature as one of the preferred investment destinations for the realisation of quality carbon credits. With billions of Dollars of investment commitment to qualitative and impact carbon (where government incentives are hardly present), the government should try to bring much clarity to these sectors. Today there is immense demand for community-led and nature-based solutions where the private sector and communities with investment from impact funds aim to reduce tremendous greenhouse gas emissions. Many of these sectors, such as cookstove or soil carbon in the agriculture sector, are immensely thriving and changing the rural landscape and ecosystems. Although the current bill doesn’t have any provision to limit the existence of carbon credits, there is an immense threat if we should not bring in a very detailed and consistent policy framework during the course work of the drafting of the carbon market framework. And we should not generalise the carbon credits for each sector as one. We must note that there is not much demand in India for quality carbon credits considering small players who will offset their carbon emissions. Thus, we should facilitate a supportive policy framework in the sectors where government intervention and engagements are minimal, which will help large investment flow for mitigating GHG emissions from these sectors.

VCM Reaches Towards $2 Billion in 2021:
New Market Analysis Published from Ecosystem Marketplace

03 August 2022 | 2021 was a historic, record-breaking year for the Voluntary Carbon Markets, and 2022 is off to a fast-paced start. With the VCM now around the $2 billion mark, this much-anticipated The State of the Voluntary Carbon Markets 2022 Q3 briefing, “The Art of Integrity.” 

The briefing offers a synthesis of EM’s wealth of all EM Respondent reported VCM carbon credit trade data for 2021 (and updates to 2020), a 6X increase in annual market data over 2019.

The VCM grew in value towards $2 Billion in 2021. This quadrupling in market value from 2020, and doubling from our last market update during COP26, was driven by an acceleration of nature-based solutions trading volume and higher prices for these and other projects with non-carbon environmental and social benefits, such as clean cookstoves and water purification devices.

From developers to investors and buyers, VCM data interests are becoming increasingly granular. Over the past several months, EM has been busy investing in upgrades to its data systems and analytical tools, applying new QAQC practices to the data, and updating its project typology and category classifications to capture the astonishing diversity of +170 project credit types from nearly 100 countries reported to us for transactions in 2020-2021.

“Quality” and “integrity” are buzzwords in the voluntary carbon markets right now. Our position has always been that transparency is fundamental for high-quality, high-integrity markets. As the markets get larger and more complex, our goal is to make sure that markets deliver real climate impact, that high-quality projects are priced and valued accordingly, and that corporate climate action actors understand their full range of options.

EM’s work is accelerating, and collaboration is essential. With new initiatives, such as the ICVCM and VCMI offering integrity guidance and principles, and the overall bullish outlook of the VCM creating the wind at our backs, EM humbly leans into its increasingly critical role as a neutral and independent nonprofit initiative driving end-to-end trade transparency in what is still a largely disaggregated, over the counter market.

We look forward to working with our growing global network of EM Respondents, Visionary Partners, Strategic Supporters, Data Partners, and new collaborators to continue to expand and strengthen our coverage of credit sales from project developers and intermediaries.

Stay tuned for our next State of the VCM briefing as EM Respondents are currently reporting 2022 data. More up-to-date, in-depth, and cross-cutting data to be published in September during Climate Week NYC.

The Integrity Council for the Voluntary Carbon Market Launches its Public Consultation for Core Carbon Principles

27 July 2022 | It’s official. The Integrity Council for the Voluntary Carbon Market (ICVCM), which encompasses deep and varied expertise from across the voluntary carbon market ecosystem including world-leading scientific, financial, practitioner, NGO, policy, indigenous, local and other forms of knowledge, has today announced the start of the public consultation for the draft Core Carbon Principles, Assessment Framework and Assessment Procedure.

What is the consultation for and how long do you have to provide feedback?

The aim of the core carbon principles are to set a definitive and consistent benchmark for credible, high-integrity carbon credits. With a deadline of 27 September 2022, it’s a 60-day public consultation on its draft Core Carbon Principles (CCPs), Assessment Framework and Assessment Procedure.

The draft Assessment Procedure sets out a proposed process for assessing CCP-eligibility, how eligible carbon credits will be tagged; how the Integrity Council will continue to oversee and enforce the CCPs; and facilitate the continual development of the voluntary carbon market.

Learn more about how to get involved on the ICVCM’s website:

Public Briefing Sessions

The ICVCM will be sharing more details on the consultation period, CCPS, and Assessment Framework during these public briefing sessions. Hear from Annette Nazareth, former SEC Commissioner and Chair of the ICVCM Governing Board, as well as a selection of other fantastic speakers.

Session 1: Wednesday 27th July 14:00 – 14:45 (BST): Register for the briefing on the 27th July

Session 2: Tuesday 2nd August 14:00 – 14:45 (BST): Register for the briefing on the 2nd August

This is a developing article. More content will be added over the course of the day and coming days.

Announcing FSC and Ecosystem Marketplace collaboration

Ecosystem Marketplace has recently signed a three-year agreement with Forest Stewardship Council (FSCGD GmbH) to collaborate and develop shared insights regarding carbon markets and non-carbon benefits as they pertain to FSC certified forests.  For more than 25 years FSC has pioneered forest certification and promoted responsible management of the world’s forests. Through this collaboration FSC seeks to connect FSC-certified forest managers with new markets, help project managers market FSC benefits and enable carbon markets to drive value to FSC certified forests.  Ecosystem Marketplace has tracked global carbon market transactions and associated benefits “beyond carbon” for more than 16 years.  Transaction attributes that EM tracks include co-benefit standards such as Climate, Community and Biodiversity (CCB) and project assessments of Sustainable Development Goals.

The shared workplan includes publishing a brief discussion paper focusing on non-carbon benefits of forest carbon projects and the overlap with FSC certified forests.  Research will pull from carbon markets data that EM collects, FSC certified projects, public data sets such as international carbon standard registries, and structured interviews with forestry project managers. The work will begin by cross mapping FSC certified forests with carbon market data that EM has compiled for forestry projects, specifically Improved Forestry Management projects, in order to identify the subset of forestry projects on which the analysis will focus.

The first discussion paper will be published pre-COP27 in Egypt in November and accompanied by a webinar presentation.  EM and FSC also hope to collaborate on side events focused on land use and the voluntary carbon market at the Forestry Pavilion at COP27.

If interested, or to learn more  about this collaboration, contact [email protected] or [email protected]

Brazil and the carbon markets

This article first appeared on Biofilica

15 June 2022 | A new Federal decree puts Brazil on route to capture an important share of the voluntary carbon market that is expected to grow at least tenfold by 2030¹ and helps to understand the executive branch’s strategy of what may turn out to be a Brazilian ETS².


In a pompous event held at the Botanical Garden in Rio de Janeiro and attended by the President, his Ministers of Economy, Environment, Foreign Affairs, Mines and Energy, with the presidents of the Central Bank, Bank of Brazil, Petrobrás, as well as dozens of CEOs and entrepreneurs of companies linked to the energy sectors, agriculture and environmental markets, the Federal Government announced a series of measures to increase Brazilian competitiveness in businesses related to decarbonization and so-called Green Investments. Undoubtedly, the most important was Decree 11,075, which established procedures for sectoral agreements for greenhouse gas (GHG) mitigation, in addition to establishing the National System for Reducing Greenhouse Gas Emissions, entitled SINARE.


A 13-year long journey

The legal basis of the decree dates back to 2009, when the National Climate Change Policy (PNMC, in Portuguese) was established by law. It is in the PNMC that the idea of sectoral agreements for GHG mitigation originates, targeting, for example, the energy, agriculture and transport sectors; it also introduced the concept of the Brazilian Market for Emission Reduction, a green and yellow ETS.

Unfortunately, after 13 years of the PNMC, we have not yet established sectoral plans and it was only until recently that we begun to see significant advances in the business environment for the development of voluntary carbon markets in Brazil, with the establishment of the Forest + Carbon Program (2020), and the National Payment Policy for Environmental Services (law 14,119) of 2021.

This pro-market direction is essential for Brazil to capture a share consistent with our competitive advantages, bringing here, via carbon markets, a necessary financing for a decarbonization route, especially in activities related to land use such as within agriculture and forest management.

This decree is only the long-awaited kick-start, as there is still a long regulatory path to address complex technical issues and legal gaps that still need to be clarified, such as the legal nature of the carbon credits, and adopted, such as the Socio-Environmental Safeguards for registration in the SINARE. Some market analysts and lawyers linked to the topic suggest that some of these gaps should be filled in the form of law, currently debated in Congress under law proposal 528/21³. Such complementary initiatives should be followed in parallel with other pricing mechanisms established by law, a fact widely recognized in Article 6 the Paris Agreement.

In any case, it is evident that the political signal of the path chosen by Brazil in relation to the financing of activities related to decarbonization, is one of more markets and less taxes. This approach is also in line with the recently published World Bank carbon pricing report, which shows that worldwide in 2021, the collected total via a carbon market was around US$ 56 billion, while in tax regimes the amount stood at US$ 28 billion. Emphasizing that in the case of markets, this is only the value of primary transactions (purchase of allowances4 + first sale in the voluntary market), that is, it does not include the secondary market that is estimated to be in the magnitude of US$ 754 billion.


What does the voluntary market have to do with all this?

The voluntary carbon market serves to increase the climate ambition of various actors, such as companies committed to Net Zero paths, while financing activities that are not yet financially viable, such as forest restoration and conservation. Numerous market analyses and reports5 indicate a growth between 15 and 20 times in the next 10 years. McKinsey estimates a market value of around $50 billion by 2030. Last year alone, more than 110 GHG sequestration and reduction initiatives funded by this market were launched only in  Verra’s Verified Carbon Standard (VCS).

Seeking a slice of this global funding cake is the obligation of any government that is seriously committed to sustainable development in Brazil. In this sense, instituting SINARE, observed by the need to define Social and Environmental Safeguards, represents a major advance and deserves to be celebrated. This mechanism has been a longstanding demand by project developers, including Biofílica. The expectation is that this central and digital registry will serve as a kind of “filter”, allowing only the registration of high integrity, socio-environmentally sound programs and projects, with real climatic benefits. This only strengthens the quality of “Made in Brazil” credits and makes us even more competitive to receive financing via carbon markets. Export.

It is also possible to imagine that within a five-year horizon, credits registered within the SINARE can access demand from regulated companies in Brazil that will need to achieve their sectoral goals. Domestic sale.



Portuguese version see below:

Decreto do Governo Federal coloca o Brasil na rota de capturar uma importante fatia do mercado voluntário de carbono que deve crescer pelo menos dez vezes até 2030¹ e ajuda a entender a estratégia do executivo do que pode vir a ser um ETS² Brasileiro.


Em um evento pomposo realizado no Jardim Botânico do Rio de Janeiro e que contou com a presença do presidente da República, seus ministros da Economia, Meio Ambiente, Relações Exteriores, Minas e Energia, com os presidentes do Banco Central, do Banco do Brasil, da Petrobrás, além de dezenas de CEOs e Empreendedores de empresas ligadas aos setores de energia, agropecuária e mercados ambientais, o Governo Federal anunciou uma série de medidas para aumentar a competitividade brasileira em negócios ligados à Descarbonização e aos chamados Investimentos Verdes. Sem dúvida, o mais importante foi o decreto 11.075 que estabelece procedimentos para acordos setoriais de mitigação de Gases de Efeito Estufa (GEE), além de instituir o Sistema Nacional de Redução de Emissões de Gases de Efeito Estufa, intitulado de SINARE.


13 anos de trajetória

A base jurídica do decreto é de 2009, quando foi estabelecida por lei a Política Nacional de Mudança do Clima (PNMC). É na PNMC que surge a ideia dos acordos setoriais para mitigação de GEE, incluindo por exemplo os setores de energia, de agricultura e transporte; além de introduzir o conceito do Mercado Brasileiro de Redução de Emissões, o ETS verde e amarelo.

Infelizmente já passados 13 anos da PNMC ainda não temos estabelecido os planos setoriais e muito recentemente começamos a ver avanços expressivos nas condições de negócios (“business environment”) para o desenvolvimento dos mercados voluntários de carbono no país, com o estabelecimento do Programa Floresta+ Carbono (2020), e da Política Nacional de Pagamento por Serviços Ambientais (lei 14.119) de 2021.

Esse direcionamento pró mercado é essencial para que o Brasil possa capturar uma fatia condizente com nossas vantagens competitivas, trazendo para cá, via mercados de carbono, financiamento mais do que necessário para uma rota de descarbonização, principalmente em atividades ligadas ao uso da terra como agropecuária e florestas.

Esse decreto é apenas o tão esperado pontapé inicial, afinal resta ainda um longo caminho regulatório para endereçar questões técnicas complexas e lacunas jurídicas que ainda precisam ser esclarecidas, como da própria natureza jurídica dos créditos, e adotadas, como por exemplo as Salvaguardas Socioambientais para registro no SINARE. Alguns analistas de mercado e advogados ligados ao tema sugerem que parte dessas lacunas deveriam ser preenchidas em formato de Lei, hoje debatidas no Congresso sob o PL 528/213.Iniciativas complementares que devem seguir em paralelo a outros mecanismos de precificação estabelecidos por Lei, fato amplamente reconhecido no artigo 6 do Acordo de Paris.

De qualquer maneira fica evidente a sinalização política do caminho escolhido pelo país em relação ao financiamento de atividades ligadas à descarbonização, mais mercados e menos impostos. Muito em linha com o recém-publicado relatório do Banco Mundial sobre Precificação de Carbono, que mostra que mundialmente em 2021 o total arrecadado via mercado de carbono foi da ordem de US$ 56 bi, enquanto nos regimes de impostos (tax) o valor ficou em US$ 28 bi. Enfatizando que no caso dos mercados, esse é apenas o valor das transações primárias (compra de allowances4+ primeira venda no Voluntário), ou seja, não inclui o mercado secundário que pode ser na ordem de US$ 754 bi.


E o mercado voluntário com isso?

O mercado voluntário de carbono serve para aumentar a ambição climática de diversos atores, como empresas comprometidas com o Net Zero, e ao mesmo tempo financiar atividades ainda sem viabilidade financeira, como restauração e conservação florestal. Inúmeras análises e reportes de mercado5 indicam um crescimento entre 15 à 20 vezes nos próximos 10 anos. A Mckinsey estima um valor de mercado da ordem de US$ 50 bi em 2030. Só no ano passado, foram lançadas mais de 110 iniciativas de sequestro e redução de GEE financiadas por esse mercado somente no padrão Verified Carbon Standard (VCS) do Verra.

Buscar uma fatia desse bolo global de financiamento é obrigação de qualquer governo comprometido seriamente com o desenvolvimento sustentável no Brasil. Nesse sentido, a instituição do SINARE, observada à necessidade da definição de Salvaguardas Socioambientais, é um grande avanço, pleito antigo das empresas desenvolvedoras de projetos como a Biofílica, e merece ser celebrado. A expectativa é que essa central única e digital sirva como uma espécie de “filtro”, permitindo somente o registro de programas e projetos socioambientalmente íntegros, com benefícios climáticos reais. Isso só fortalece os créditos “Made in Brazil” e nos deixa ainda mais competitivos para receber financiamento via mercados de carbono. Exportação.

É também possível imaginar que em um horizonte de cinco anos os créditos registrados dentro do Sinare possam acessar demanda de empresas reguladas no Brasil que precisarão atingir suas metas setoriais. Venda doméstica.

RE100 proposes changes to its Technical Criteria: European market boundary narrowed

This article first appeared on Greenfact.

09 June 2022 | The RE100 launched a public consultation on three proposed changes to its technical criteria following town hall meetings it held with members in February 2022.

The consultation proposes the following three key changes:

  1. Make AIB membership the market boundary for Europe
  2. Accept physical cross-market procurement when certain conditions are met
  3. Introducing a 15-year limit on commissioning dates which RE100 members may claim purchased (not-self generated) renewable electricity from.

A glimpse into the RE100

RE100 is a global initiative led by The Climate Group in partnership with the CDP to drive change towards zero-carbon grids at scale. The initiative consists of large and influential firms aiming for 100% renewable electricity. According to the initiative for a company to be considered 100% renewable it “must procure or self-produce 100% of its electricity throughout its entire operations from renewable sources.”

On the path to achieving 100% renewable electricity consumption RE100 companies may use the following two methods of procurement:

  • Self-production and use of renewable electricity. These self-owned production devices can be grid-connected either onsite or offsite or they can be entirely off the grid.
  • Procured renewable electricity sourced from producers and suppliers in the market. This includes Power Purchase Agreements, retail purchases from utilities and the procurement of unbundled Energy Attribute Certificates (EACs).

Proposed changes to the RE100 Technical criteria

The RE100’s technical criteria outline the renewable energy sourcing options available to companies that participate in the RE100 campaign while defining what counts as renewable electricity. The criteria are set by the RE100 Technical Advisory Group in consultation with member corporations and with the approval of the RE100 Project Board.

Considering that the renewable energy market is an everchanging landscape revisions are made to the technical criteria every two years in March. The next planned update will be published in March 2023.

Making AIB membership the market boundary for Europe

The RE100 requires its members to procure renewable electricity from the same markets in which they operate and most markets are defined by national geographic boundaries. However, Europe and North America have been regarded as exceptions due to having single markets for electricity trading.

Regarding Europe specifically, the CDP’s guidance on market boundaries is more restrictive and differs from the RE100’s as the CDP considers AIB member countries as the defining market boundary for Europe.

AIB member countries

As such to prevent this conflicting guidance between the two initiatives considering that some RE100 members also report to the CDP, the CDP’s market boundary provisions will be adopted. This means that new contracts that do not observe this market boundary will not be accepted by the RE100 however any contracts before 31 December 2021 would continue to be accepted.

The purpose of this proposal is to have standardised harmony between the CDP’s and RE100’s reporting guidance and to ensure that EACs in the European market boundary are EECS compliant.

Market impact

This means that from 31 December 2021 onwards electricity and the associated EACs must be sourced from within the AIB market which will restrict the available markets for members considering that not all European countries are a part of the AIB and to this, the RE100 market boundary before was far larger.

Once this goes into effect the following countries will no longer be part of the RE100’s defined single market for electricity trading in Europe:

Countries no longer part of RE100's single market for Europe
Countries no longer part of RE100’s single market for Europe

The impact of this change will especially be more significant for RE100 members who do not report to the CDP and as such have only been observing the RE100’s larger European market boundary.

According to the RE100 members who operate in non-AIB countries can only use in-country renewable electricity to decarbonize consumption. Based on reporting from 159 members in 2021, 459 GWh of procurement of renewable electricity from 22 RE100 members in 28 European countries will no longer meet the RE100’s technical criteria. However, it is of note that most of these members already report to the CDP and as such already privy to the stricter provisions.

Regarding the UK, the RE100 and CDP have taken note of the legal situation of procurement between the UK and mainland Europe. In the short-to-medium term, it is expected that the UK will cease accepting EU renewable electricity while a mutual recognition is negotiated. The CDP and RE100 have mentioned in their proposal that should the UK become an AIB member, then it would be recognized as part of the market boundary for Europe in their respective guidelines. It is assumed that this will also be the case for any other European country either in the list above or new to come that join the AIB.

For RE100 members that already report to the CDP, this change will not have a major impact however for non CDP members the impact will be significant and a transition and grandfathering plan for the 2023 annual reporting cycle will possibly take place.

This could mean a bullish signal for the market as current and new members’ demand for renewable electricity and Guarantees of Origin within the AIB will increase which would provide upward support to GoO prices. Additionally, for RE100 members that have operations within non-AIB countries, the demand for local renewable energy and local EACs will significantly increase as according to the new rules they will only be allowed to source in-country resources. In certain countries listed like the UKwe expect both the amount of REGO issuances to significantly increase, as the demand will be largely higher but we expect demand to exceed supply and as such the price for UK REGOs to increase.

It is also of note that AIB membership is expected to increase especially with the Energy Community Secretariat being in the midst of launching a project to create an electronic system for GOs in the following 8 Eastern European countries namely:


•Bosnia and Herzegovina,



•North Macedonia,




Therefore the more countries join the AIB the wider the market boundary for procurement by RE100 members.

Accepting physical cross-market procurement when certain conditions are met

The RE100 proposes to amend its note on market boundaries to accept claims of use of renewable electricity sourced across market boundaries when all of the following apply:

  • The Member has entered into a PPA with a producer in a different market from their consumption or into a green electricity product with a utility that has such a PPA.
  • The cross-market electricity is physically transmitted from the renewable electricity generator connected to the cross-market transmission infrastructure. (there has to be a physical interconnection between the countries)
  • The delivery and ownership of the EACs from the generator to the consumer are specified in the PPA. Ideally, credible EAC systems should be used and recognized in both markets.
  • The residual mix is calculated in both markets.

Additionally, where single markets exist as defined by the RE100 (e.g Europe and North America), all cross market procurement between countries within those single market boundaries will be accepted. In the case of Europe, this means that supply arrangements for renewable electricity between AIB member states will be accepted but beyond that, the abovementioned points need to be adhered to.

If this proposal is realised this could have a significant impact on the possible volumes of renewable electricity that RE100 members could credibly source which would potentially decrease especially with the physical interconnector requirements.

ENTSO-E Transmission System Map showing cross border interconnection in Europe only
ENTSO-E Transmission System Map showing cross border interconnection in Europe only

That said the European Union has been adamant about promoting interconnections with its neighbours with the aim of enhancing the security of supply. This is reflected in the Commission’s recently published REPowerEU plan which plans to “implement many long-pending projects, with a particular focus on cross-border connections to build an integrated energy market that secures supply in a spirit of solidarity.

As per the REPowerEU plan, an additional EUR 29 billion of investments will be required to power the grid by 2030 to make it fit for increased use and production of electricity. All relevant projects to be funded are included in the fifth PCI list which includes 98 projects in total of which 67 are related to electricity transmission and storage projects. On the priority list is two offshore grid interconnections namely:

  • Celtic Interconnector (between France and Ireland)
  • North Sea Wind Power Hub (between Denmark, Germany and the Netherlands)

The Commission also stated that it plans on increasing the interconnection capacity between the Iberian Peninsula and France while it has also taken actions in synchronizing the Baltic State’s electricity networks with the continental European network. As more physical interconnections are established between the EU and third neighbouring countries the possible renewable energy volumes that RE100 members could source from becomes wider.

Introducing a 15-year limit on commissioning dates

The RE100 proposes to introduce a 15-year commissioning date limit on the facilities members may claim renewable electricity from. This limit will only apply to purchased electricity and not self-generation.

The reason behind this proposal is that the RE100 would like its technical criteria to further support the procurement of renewable electricity which adds new RES capacities to the grids. According to the proposal “while older renewable generation is still an important resource for the grid, procuring from it does not directly change the grid mix.”

Market impact

According to reports from 159 members in 2021, 15 Members procuring from 31 countries purchased 523 GWh of renewable electricity from facilities commissioned more than 15 years ago which means that these companies would need to change their procurement. Meanwhile, around 19.2 TWh of renewable electricity was procured from facilities commissioned in the last 15 years.

It is of note that the commissioning dates of around 48.3 TWh of purchased renewable electricity were not reported by members thus hindering a more robust impact assessment. According to the RE100, data on commissioning dates are being sought from EAC registries globally for the initiative to better develop its impact assessment.

However one can assume that this would shift the demand profile of members within the initiative to be more focused on procuring renewable energy from younger plants such as wind and solar PV plants as opposed to older hydro technologies. This demand shift could further trickle down into the EAC markets. Also, this criterion for generation from “younger” power plants is one that is already adopted by energy labels such as Naturmade as such this change could result in increased demand for such energy labels. Historically there has been a slightly wider spread between EACs from younger plants versus hydro based certificates however more recently this spread between technologies has become much narrower this could possibly change as more RE100 members change their procurement methods.

Moving forward

Overall the proposed changes by the RE100 while more restrictive are aimed to have the initiative’s guidelines fall in line with the CDP’s and also provide guidelines that allow its members to credibly source renewable energy with a demand that fosters new renewable capacities on the grid.

Membership to the RE100 has been growing year on year with over 23 corporations joining in 2022 thus far and a current total of 372 members thus far. Considering that in 2021, the aggregated electricity consumption of 315 reporting members was over 340TWh, higher than the United Kingdom the sheer demand from these members has and will continue to have a large impact on renewable energy and EACs demand.

Ambitious New Plan to Scale Up REDD+ Announced

COP26 can be characterized by pledges, protests, and promises. One of the most significant and notable pledges was “The Glasgow Leaders’s Declaration on Forests and Land Use”. The pledge galvanized myriad actors in the carbon space, setting in motion further plans to tackle the climate crisis head-on via nature-based solutions.

Everland , a specialized conservation marketing company has launched The Forest Plan this past Thursday as a response to The Glasgow Leaders’ Declaration on Forests and Land Use at COP26. This ambitious plan  aims to scale up Everland’s portfolio of community-based Reduced Emissions from Deforestation and forest Degradation (REDD+) projects by supporting the development of up to 75 tropical forest conservation projects in critical hot spots. REDD+ projects and their positive outcomes can be found all over the world, including protecting and restoring flora and fauna within designated project areas, as well as supporting livelihoods for those that directly depend on the sustainable management of these tropical forests.

Everland has a proven track record of producing high quality REDD+ credits by working with and channeling funding to Indigenous Peoples and Local Communities (IPLCs). The Forest Plan aims to dramatically scale up this effort, helping project developers, communities, and governments working on the ground generate up to 90 million tons of Verified Emission Reductions (VERs) annually and over 800 million tons in total by 2030. Under The Forest Plan, projects will also be developed by Wildlife Works, the Wildlife Conservation Society, Wildlife Alliance, and other Everland partners.

The plan is expected to generate over $2 billion in financial flows over the next 10 years that’ll be streamlined towards community-based forest conservation projects. Everland’s Forest Plan will rely on ever evolving science-based approaches as well as addressing the economic root cause of forest loss and degradation.


Disclaimer: Everland is an EM Strategic Supporter and is also a partner with Forest Trends’ Communities and Territorial Governance Initiative.

Blog: World Bank 2022 Carbon Pricing Report Launch
Global carbon pricing generating record revenues but much potential remains untapped

24 May 2022  |  The climate crisis continues to escalate amid a prolonged pandemic, increasing economic instability and geopolitical tensions. Commitments at COP26 keep hope alive that avoiding the worst effects of climate change is within our reach, but the peril remains stark.  The latest work from the Intergovernmental Panel on Climate Change makes plain that we must arrest rising emissions now to ward off climate danger. Meeting this challenge in uncertain times calls for ambitious, just, and comprehensive action by policymakers. In this regard, carbon pricing, within an integrated policy mix, is one of the most powerful tools for guiding economies toward low emissions paths. To maximize the benefits, carbon price signals must be sustained, strengthened, and extended to a greater portion of global emissions, three-quarters of which are currently untouched by carbon pricing instruments. However, recent economic instability, volatile energy markets and rising energy prices exacerbate the political challenges for policymakers.

The World Bank’s annual report on the State and Trends of Carbon Pricing continues to provide a trusted global snapshot of carbon pricing developments year to year. The past year has seen some positive signs, particularly in relation to higher carbon prices, increased revenues, progress towards resolving cross-border issues, and the adoption of new rules for international carbon markets (under Article 6 of the Paris Agreement). However, as with previous years, progress has been far from adequate. As of April 1, 2022, only four new carbon pricing instruments had been implemented in the past year and despite record-high prices in some jurisdictions, the price in most jurisdictions remains well below the levels required to deliver on the Paris Agreement temperature goals.

In 2021, higher carbon prices, revenue from new instruments, and increased auctioning in emissions trading systems have resulted in a record USD 84 billion of global carbon pricing revenue, around 60% higher than in 2020.  Such an impressive increase highlights carbon pricing’s burgeoning potential to reshape incentives and investment toward deep decarbonization. Further, it illustrates carbon pricing’s potential role as a broader fiscal tool to contribute towards broader policy objectives, such as to restore depleted public finances, aid pandemic recovery, or support vulnerable sectors and communities to adapt to climate impacts and achieve just transitions.

“In 2021, higher carbon prices, revenue from new instruments, and increased auctioning in emissions trading systems have resulted in a record USD 84 billion of global carbon pricing revenue, around 60% higher than in 2020.”

During this year, cross-border approaches for carbon pricing and international cooperation have made significant strides forward.  The European Union moved closer to adopting its Carbon Border Adjustment Mechanism, while Canada and other jurisdictions reaffirmed their commitments to investigate border carbon adjustments and bring down hitherto daunting technical and political barriers to such reforms. The COP26 agreements on new rules for international carbon markets help pave the way for more cross-country collaborations and trade.

Encouragingly, more countries continue to explore options to introduce a carbon price, including in low- and middle-income countries. The World Bank is gearing up to meet this increased demand from client countries for technical support on carbon pricing – and is helping countries mainstream it into wider fiscal policy and long term decarbonization strategies.  This includes developing advisory services, analytics, innovation and hosting initiatives such as the Partnership for Market Implementation (PMI). The PMI will provide technical assistance to at least 30 countries in developing and implementing domestic carbon pricing and operationalizing Article 6 of the Paris Agreement.

The World Bank Group’s Climate Change Action Plan (2021-25) committed to increase the World Bank’s climate finance target, align financing flows with the goals of the Paris Agreement, and achieve results that integrate climate and development. Through this Action Plan, the World Bank Group is well positioned to leverage its convening power, knowledge and research, and country program support to help countries make informed climate decisions, including on carbon pricing.

This piece appears as a World Bank Blog and the foreword of the 2022 annual State and Trends of Carbon Pricing report. The full report is available for download here.

CITES takes unprecedented steps to stop the illegal African rosewood trade

On March 11th, the 74th Standing Committee meeting of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) met to discuss the continuing illegal trade of Pterocarpus erinaceus, also known as kosso or African rosewood. Today, the CITES Secretariat took an unprecedented step by notifying all range States (countries where the species is endemic) that they have 30 days to either:

  1. Verify that the species is harvested legally (via a Legal Acquisition Finding [LAF]) and without further detriment to the survival of the species (via a Non-Detriment Finding [NDF])
  2. Submit to a voluntary zero-export quota where no exports of the species will be allowed, or
  3. Face formal trade suspension.[1]

This is a remarkable move.

The proposal, put forth by all range States who attended the meeting and supported by the US and the EU, initiates Article XIII, also known as CITES’ official compliance framework. Invoking Article XIII indicates a serious concern for “systemic or structural problems with the implementation or enforcement of the Convention.”[2] In other words, it is an acknowledgment that past measures to protect P. erinaceus have simply not worked, and that CITES Parties (countries that are signatory to CITES) who are responsible for the measures to verify the legality and sustainability of trade, have not been able to eradicate illegal trade alone. It is also in keeping with 2019 CITES guidance on the verification of legal acquisition of CITES specimens. While producing a LAF to verifying legal acquisition has always been a requirement for issuance of a CITES export permit, the 2019 guidance acknowledges states that rule of law cannot simply be assumed, and that leaving Parties to their own devices (absent unifying guidance) was undermining the ability of CITES to control illegal trade.[3]

African rosewood was listed on Appendix II of CITES in 2016. To date, however, no range State has been able to submit an acceptable LAF or NDF, and illegal trade remains pervasive. Piecemeal measures, such as trainings and risk assessments recommended by the CITES Secretariat, have not been implemented at the scale required to truly make a difference.

Background: Why African rosewood?

The term “rosewood” is used to designate several hundred species of tropical timber found across West and Central Africa, Southeast Asia, and Latin America. As anchor species in old-growth forests, rosewood can deliver critical ecosystem services, such as supporting biodiversity and reducing flooding and water stress. Healthy ecosystems can also support sustainable socio-economic development – when harvested sustainably, rosewood can boost local livelihoods; it is also traditionally used for medicine.

A large body of evidence has demonstrated illegalities in rosewood supply chains, including harvesting in contravention of national laws, smuggling, transshipment, and documented links to corruption and conflict. Rosewood has become the most trafficked group of endangered species, and African rosewood is by far the most trafficked rosewood. Corruption, poor governance, and conflict over natural resources undermines the social fabric of national governance and sustainable development, and rosewood species are often targeted by traders taking advantage of an environment in which laws are non-existent or poorly enforced. Import data reveal that rosewood follows a “boom and bust” cycle, in which traders can nimbly pivot from one country to another, often capitalizing on weak governance, political transitions, or the suspension of national legislation, such as a log export ban. In several range States, the revenues generated from the rampant extraction of rosewood fuels ongoing inter- and intrastate conflict, including armed conflict.

China is the main – but not the only – rosewood market, led in part by a resurgence in demand for Ming dynasty-era classical furniture and décor and to financial speculation that, as political ecologist Annah Zhu argues, functions as a “cultural fix” or an outlet for surplus wealth.[4] Twenty-nine species, including P. erinaceus, are officially designated as hongmu (红木) under China’s National Hongmu Standard (2017). Given its cultural importance, China Customs maintains separate HS codes for rosewood logs, sawnwood, and furniture.

2014 marked the peak of the rosewood “boom,” in which China imported over $2 billion in hongmu species. Trade fell precipitously in 2015 before peaking briefly again in 2017. By 2020, imports had dropped to one-fifth of their 2014 levels, and the proportion of rosewood species in China’s total log import mix has dropped accordingly. Traditionally, most of China’s rosewood imports have come from Southeast Asia. From 2010 to 2014, however, China’s rosewood imports from Africa soared 700%, as Asian rosewood species were increasingly logged out and traders found willing sellers, a less-expensive species (P. erinaceus), and governments that either lacked capacity to clamp down on illegal logging and trade, or in some cases, actively supported it.  In 2020, over 83% of China’s rosewood imports were from Africa.

Figure 1: China’s imports of hongmu logs and sawnwood, by source region and volume, 2011-2020

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

Boom and bust: Tracking the fast-moving kosso trade between West Africa and China

African rosewood is now vital to the timber trade between West Africa and China. Seventy-seven percent of all hardwood logs imported from West Africa into China are now reported as hongmu, soaring from 34% in 2011, even as absolute trade in hongmu has dropped.

Figure 2: Proportion of China’s log imports from West Africa classified as rosewood, 2011-2020

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

In January 2017, CITES listings regulating trade in many rosewood species took effect, including a genus-wide listing for Dalbergia and a listing for P. erinaceus. While overall Chinese imports have declined, China’s rosewood imports in 2017 actually rose compared to the previous year – demonstrating the limited effectiveness of the CITES listing. It was only in November 2018, when CITES issued a trade suspension of P. erinaceus from Nigeria,[5] that Chinese imports began to decline. Nigeria was then the largest supplier of rosewood globally and accounted for over 60% of China’s rosewood imports. An Environmental Investigation Agency (EIA) report revealed that the then-Environment Minister, who signed close to 3,000 CITES export permits, allowed traffickers to export an estimated $300 million worth of logs.[6] The trade suspension had immediate impact: China’s imports of Nigerian rosewood the next year fell by 30-fold, causing overall rosewood imports to drop more than 50%.

Figure 3: China’s monthly imports of hongmu logs and sawnwood from West Africa, by volume, January 2017 – December 2021

Source: General Administration of Customs, P.R. China, compiled and analyzed by Forest Trends

Imports from other supplier countries, such as The Gambia and Ghana, are down as well, due to a combination of factors such as enforcement of national export bans, difficulty in getting CITES permits, and the economic turmoil precipitated by COVID-19. And yet, the market has survived by simply shifting elsewhere, with Sierra Leone and Mali emerging as China’s top suppliers of P. erinaceus. In 2021, almost two-thirds of China’s P. erinaceus imports by volume, and three quarters by value, were from these two countries. Trade is booming in Sierra Leone, which supplied 36% of all reported rosewood imports into China in 2021 but is barely visible (see Figure 3) until late 2017. A February 2022 investigation claims that the country’s Minister of Agriculture, Forestry, and Food Security is “personally benefitting” from the kosso trade, which has catalyzed “catastrophic food insecurity and…environmental and ecological devastation.”[7]

China does not currently require traceability of imported wood products through their supply chains, nor have they instituted an import regulation aimed at excluding illegally sourced timber from the market. This could change, as China’s 2019 Forest Law contains a legal basis for prohibiting illegal logging, and implementing regulations are expected to clarify whether and how the Law applies to imports. Until then, Customs officials must rely on CITES permits, which are seen as the exporter’s responsibility – once the paper is in-hand, it is accepted. But permits are often fraudulent.

Evidence from Vietnam

Vietnam has historically been a key market for rosewood, but imports have dropped precipitously between 2015 and 2020, then stopped altogether in 2021. Vietnam is the second-largest importer of African timber in the world beyond China, with imported P. erinaceus largely processed into rosewood furniture and exported onward to China. Unlike China, Vietnam has an import regulation in place that prohibits the imports of illegal timber: in 2019, Vietnam signed a bilateral trade agreement, the Forest Law, Governance, Enforcement and Trade Voluntary Partnership Agreement (FLEGT-VPA) with the EU, which contained a commitment to ensure that wood products are legally sourced. In 2020, a Decree was issued on the Vietnamese Timber Legality Assurance System (VNTLAS), stipulating that for countries and species deemed “high-risk,” importers must provide additional documentation demonstrating legal compliance and undertake due diligence.[8] While importers claim the new requirements are “confusing” and customs data indicate few signs in reduction of overall high-risk timber imports,[9] as of 2021, Vietnam no longer imports P. erinaceus. Other factors could be the decreasing demand within China, or that Chinese traders are sourcing directly from range States rather than through Vietnam.

Figure 4: Vietnam’s imports of P. erinaceus, by volume and value, 2015-2020. Left: Nigeria; Right: all other supplier countries

Source: Vietnam’s Customs Statistics, compiled by Vietnamese timber associations and Forest Trends


Given the evidence of continued trade in P. erinaceus, the CITES Secretariat’s notification to range States is a big step – whether the outcome be robust LAF and NDF, zero-export quotas, or formal trade suspension. No longer would importers simply accept a CITES permit as evidence of legal and sustainable sourcing. Because the notification covers all countries in which P. erinaceus is grown, we are less likely to see “leakage” in which restrictions in one country lead to a spike in trade from another, as has often been the case.

However, there remains risk that trade will simply continue unreported via smuggling or misdeclaration of logs as other, non-protected species. Parties to CITES should also be aware of other African tropical hardwood species that are already being identified as substitutes for kosso in Chinese markets, many of which are also being heavily exploited (Table 1). A genus listing for Pterocarpus will be submitted to the 19th CITES Conference of Parties (CoP) in November 2022, and there is some momentum for a Guibourtia genus listing (unlike listings of single species, genus listings are thought to be more comprehensive). But without widespread protection for all tropical hardwoods, there is a risk that lookalike species will be targeted. Traders claim that South American species may already also be substituting for African rosewood and China’s imports from the region are surging.

Ultimately, effective legislation by all nations, particularly the Chinese government, is needed to exclude all illegally sourced timber from international trade. China could accomplish this by enforcing the 2019 Forest Law or other measures, which can complement CITES listings to ensure that future trade in all timber is legal, sustainable, and beneficial to local livelihoods in places where timber is grown.

Table 1: Potential replacement species for P. erinaceus

Note: based on best available public data. Forest Trends assumes responsibility for any errors.

For more information on the legality risks associated with rosewood supply chains, please visit

[1] CITES. 2022. “Notification to the Parties No. 2022/021: Expedited application of Article XII for West African rosewood Pterocarpus erinaceus for all range states.” Accessed March 28, 2022.

[2] CITES. 2022. “Convention on International Trade in Endangered Species of Wild Fauna and Flora, Article XIII”. Convention on International Trade in Endangered Species of Wild Fauna and Flora. Accessed March 16, 2022.

[3] Forest Trends and CIEL. 2022. Legal Acquisition Findings: A Handbook by Forest Trends and Center for International Environmental Law (CIEL). Washington, DC: Forest Trends. Accessed March 16, 2022.

[4] Zhu, Annah Lake. 2018. “China’s Rosewood Boom: A Cultural Fix to Capital Overaccumulation”. Annals of the American Association of Geographers 110 (1): 277-296. DOI: 10.1080/24694452.2019.1613955

[5] CITES. 2018. “Notification to the Parties: Application of Article XIII in Nigeria”. Convention on International Trade in Endangered Species of Wild Fauna and Flora. Accessed March 16, 2022.

[6] EIA. 2017. The Rosewood Racket: China’s Billion Dollar Illegal Timber Trade and the Devastation of Nigeria’s Forests. Washington, DC: Environmental Investigation Agency. Accessed March 16, 2022.

[7] Thomas, Abdul Rashid. 2022. “Chainsaw Massacre: How Sierra Leone’s Forestry Minister benefits from Illegal Logging”. The Sierra Leone Telegraph, February 27. Accessed March 16, 2022.

[8] Forest Trends. 2021. Vietnamese Imports of High-Risk Timber: Current Status and Control Mechanisms. Washington, DC: Forest Trends. Accessed March 16, 2022.

[9] Cowan, Carolyn. 2022. “Vietnam’s timber legality program not making a dent in risky wood imports”. Mongabay, February 2. Accessed March 16, 2022.

(This blog first appeared on Forest Trends’ blog: Viewpoints on 28 March 2022)

REDD+ evolves with Verra’s changes to key methodologies

This blog first appeared on Carbon Pulse.

REDD+ refers to reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries.

The changes would affect Avoiding Unplanned Deforestation and Degradation (AUDD) projects by updating and standardising methods for measuring project success (baseline setting based on jurisdictional data and monitoring) and addressing deforestation that migrates elsewhere (leakage). They draw on years of public consultation and incorporate the majority views of scientific experts from a decade of on-the-ground experience.

In proposing the updates, Verra upholds the global vision that guided the creation of REDD+ more than 15 years ago: a way for resource-constrained governments to finance forest protection. At the time, few governments could accurately estimate – let alone counter – deforestation within their jurisdictions, so standalone projects emerged to protect the most vulnerable forest areas as government programs materialized.

The plan was – and remains – to “nest” standalone projects into government programmes. The Paris Agreement helps integrate forests into government climate strategies, or Nationally Determined Contributions (NDCs). Tools for developing these projects have changed dramatically, thanks to advances in remote sensing and data collection, and they enable the creation of more straightforward, standardised approaches that align with how jurisdictional initiatives can evolve under the Paris Agreement.

Under current rules, project proponents generate baselines through a lengthy process that requires complex modelling of data gathered in “reference areas” that correlate with project areas. Independent validation/verification bodies (VVBs) then audit these baselines before putting them out for public consultation, and these are updated every six years.

Under proposed rules, Verra or a designated activity data provider (ADP) will develop jurisdictional-level activity data baselines, and that data will determine project baselines.  Instead of complex modeling, the new rules use Verra’s standardised benchmark risk mapping tool to identify the most vulnerable forest areas within a jurisdiction in a baseline period.

Initially created to nest projects within jurisdictional programs, the tool uses fewer indicators than traditional modeling does, but it emphasises those that have proven most consistently reliable in the short term, such as proximity to recent deforestation. Verra will then use its risk allocation tool to distribute the jurisdictional deforestation baseline across project areas. This will be used by project proponents – together with project area-specific emissions factors – to establish project baselines. Jurisdictional baselines will then be reassessed every six years, just as individual project baselines are today.

The new approach is consistent with changes that drew broad support in previous public consultations, and we will be unpacking key elements of it in the coming weeks.

This is the first in a series of technical briefings meant to support the public consultation, and the next installment will look at the difference between a forest emissions reference level (FREL) and jurisdictional activity data created under Verra. Further information on Verra’s changes to REDD+ methodologies can be found by viewing the two webinars held in late March.

Scaling up nature-based solutions in the Yaeda Valley

21 April 2022 | Following 12 months of work to expand the award-winning Yaeda Valley REDD project in northern Tanzania, the new project and its activities were validated in March by Plan Vivo, and it is now known as the Yaeda–Eyasi Landscape Project.

Protecting over 100,000Ha of wildlife-rich dryland forest, the project is now Plan Vivo’s largest active forest protection project and supplies high-quality carbon credits to the rapidly expanding voluntary carbon market while delivering livelihood and biodiversity benefits to 61,000 indigenous people.

The project was initiated in 2011 by Carbon Tanzania in partnership with three Hadza hunter-gatherer communities. Over the years it has grown incrementally to protect 32,000 ha of Hadza ancestral forests and in 2019 won the UN Equator Prize. Witnessing the success of this pilot project, nine surrounding Datooga pastoralist communities joined forces with the Hadza and Carbon Tanzania to develop the Yaeda–Eyasi Landscape project resulting in the protection of 110,500 ha of dryland forest legally owned by the Hadza and Datooga people.

“We are delighted to have been able to work with local communities to build a climate solution that secures their land-rights and provides access to carbon finance. Our project development model has shown that when indigenous people have reliable, secure rights over their natural resources and receive appropriate compensation for their efforts to protect and manage them, powerful climate action results are possible.” – Jo Anderson, Co-Founder and Director of Carbon Tanzania, said:

The Hadza and Datooga communities value their land and natural resources in different ways but work together to defend their forests and prevent 171,100 trees from being cut down every year resulting in 177,284 tonnes of avoided emissions annually. These emissions are quantified and certified as carbon credits and sold on the voluntary carbon market. Carbon Tanzania has partnered with myclimate to part-fund the project expansion through pre-payments, and it will be the primary buyer for the credits going forward.

The Hadza and Datooga communities are now able to directly access international climate finance through the voluntary carbon market with the assistance of Carbon Tanzania. Now, instead of bearing the cost of conservation, the Hadza and Datooga are benefiting from a commitment to manage and conserve it and are empowered to determine their own developmental needs.

The Yaeda–Eyasi Landscape project now extends around Lake Eyasi and connects the world-famous Ngorongoro Conservation Area, a UNESCO World Heritage site, to the Yaeda Valley. This habitat connectivity allows for the movement of wildlife, which results in enhanced outcomes for the conservation of the wider landscape and contributes to global efforts to protect biodiversity.

The scaling up of this nature-based solution demonstrates that the voluntary carbon market is an effective way to deliver climate finance to the frontline and indigenous communities who are conserving biodiversity, strengthening their land rights, and protecting traditional lifestyles, while improving their livelihoods.

Press Release – IPCC Report on Climate Change:
It’s not looking good. We have the evidence. We have the tools. Climate action is needed now.

GENEVA, Apr 4 – In 2010-2019 average annual global greenhouse gas emissions were at their highest levels in human history, but the rate of growth has slowed. Without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5°C is beyond reach. However, there is increasing evidence of climate action, said scientists in the latest Intergovernmental Panel on Climate Change (IPCC) report released today. [original IPCC press release available here]

Since 2010, there have been sustained decreases of up to 85% in the costs of solar and wind energy, and batteries. An increasing range of policies and laws have enhanced energy efficiency, reduced rates of deforestation and accelerated the deployment of renewable energy.

“We are at a crossroads. The decisions we make now can secure a liveable future. We have the tools and know-how required to limit warming,” said IPCC Chair Hoesung Lee.  “I am encouraged by climate action being taken in many countries. There are policies, regulations and market instruments that are proving effective.  If these are scaled up and applied more widely and equitably, they can support deep emissions reductions and stimulate innovation.”

The Summary for Policymakers of the IPCC Working Group III report, Climate Change 2022: Mitigation of climate change was approved on April 4 2022by 195 member governments of the IPCC, through a virtual approval session that started on March 21. It is the third instalment of the IPCC’s Sixth Assessment Report (AR6), which will be completed this year.

We have options in all sectors to at least halve emissions by 2030

Limiting global warming will require major transitions in the energy sector. This will involve a substantial reduction in fossil fuel use, widespread electrification, improved energy efficiency, and use of alternative fuels (such as hydrogen).

“Having the right policies, infrastructure and technology in place to enable changes to our lifestyles and behaviour can result in a 40-70% reduction in greenhouse gas emissions by 2050. This offers significant untapped potential,” said IPCC Working Group III Co-Chair Priyadarshi Shukla. “The evidence also shows that these lifestyle changes can improve our health and wellbeing.”

Cities and other urban areas also offer significant opportunities for emissions reductions.  These can be achieved through lower energy consumption (such as by creating compact, walkable cities), electrification of transport in combination with low-emission energy sources, and enhanced carbon uptake and storage using nature. There are options for established, rapidly growing and new cities.

“We see examples of zero energy or zero-carbon buildings in almost all climates,” said IPCC Working Group III Co-Chair Jim Skea. “Action in this decade is critical to capture the mitigation potential of buildings.”

Reducing emissions in industry will involve using materials more efficiently, reusing and recycling products and minimising waste. For basic materials, including steel, building materials and chemicals, low- to zero-greenhouse gas production processes are at their pilot to near-commercial stage.

This sector accounts for about a quarter of global emissions. Achieving net zero will be challenging and will require new production processes, low and zero emissions electricity, hydrogen, and, where necessary, carbon capture and storage.

Agriculture, forestry, and other land use can provide large-scale emissions reductions and also remove and store carbon dioxide at scale. However, land cannot compensate for delayed emissions reductions in other sectors.  Response options can benefit biodiversity, help us adapt to climate change, and secure livelihoods, food and water, and wood supplies.

The next few years are critical

In the scenarios we assessed, limiting warming to around 1.5°C (2.7°F) requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by 43% by 2030; at the same time, methane would also need to be reduced by about a third. Even if we do this, it is almost inevitable that we will temporarily exceed this temperature threshold but could return to below it by the end of the century.

“It’s now or never, if we want to limit global warming to 1.5°C (2.7°F),” said Skea. “Without immediate and deep emissions reductions across all sectors, it will be impossible.”

The global temperature will stabilise when carbon dioxide emissions reach net zero. For 1.5°C (2.7°F), this means achieving net zero carbon dioxide emissions globally in the early 2050s; for 2°C (3.6°F), it is in the early 2070s.

This assessment shows that limiting warming to around 2°C (3.6°F) still requires global greenhouse gas emissions to peak before 2025 at the latest, and be reduced by a quarter by 2030.

Closing investment gaps

The report looks beyond technologies and demonstrates that while financial flows are a factor of three to six times lower than levels needed by 2030 to limit warming to below 2°C (3.6°F), there is sufficient global capital and liquidity to close investment gaps. However, it relies on clear signalling from governments and the international community, including a stronger alignment of public sector finance and policy.

“Without taking into account the economic benefits of reduced adaptation costs or avoided climate impacts, global Gross Domestic Product (GDP) would be just a few percentage points lower in 2050 if we take the actions necessary to limit warming to 2°C (3.6°F) or below, compared to maintaining current policies,” said Shukla.

Achieving the Sustainable Development Goals

Accelerated and equitable climate action in mitigating and adapting to climate change impacts is critical to sustainable development.  Some response options can absorb and store carbon and, at the same time, help communities limit the impacts associated with climate change. For example, in cities, networks of parks and open spaces, wetlands and urban agriculture can reduce flood risk and reduce heat-island effects.

Mitigation in industry can reduce environmental impacts and increase employment and business opportunities. Electrification with renewables and shifts in public transport can enhance health, employment, and equity.

“Climate change is the result of more than a century of unsustainable energy and land use, lifestyles and patterns of consumption and production,” said Skea. “This report shows how taking action now can move us towards a fairer, more sustainable world.”

For more information, please contact:

IPCC Press Office, Email: [email protected]

IPCC Working Group III:
Sigourney Luz: [email protected]

Talking Carbon Markets with US Climate Envoy, John Kerry

1 April 2022 | I was delighted to join a roundtable with other climate tech innovators at Salesforce Tower in San Francisco a few weeks ago. We came together with John Kerry to discuss how innovation and technology are delivering climate solutions, and explore the role carbon markets can play in the transition to net zero.

There is incredible value in policy coming together with tech innovators to fight the climate crisis. Neither can create change in silo and both rely equally as much on each other in order to challenge the status quo.

What was abundantly clear is that, together, we hold the keys to unlock net zero progress at a much greater speed than is currently possible — something that is increasingly important as the timeframe for targets to be achieved narrows.

Here are my three main takeaways from the meeting on the role carbon markets can have in the global transition to net zero:

1. Carbon markets are a gateway to short-term action

There is now consensus that all companies, sectors and countries should prioritize reducing their own emissions as much as possible before considering offsetting. This is known as the “mitigation hierarchy”. But for many sectors, such as shipping, or aviation, where the technology isn’t currently available for full decarbonization, offsetting will play a critical short- to medium-term role in climate action because it’s the only option. Effective carbon markets, with high levels of transparency about the quality of the credits available, will achieve maximum environmental impact at least cost.

2. The private sector can supercharge action

Governments and regulators wield great power, but cannot move at the speed required to achieve transition targets. This is why, in the short-term, voluntary action from the private sector has to fill the gap. The more the private sector can come up with high-integrity, high-impact approaches to tackling emissions — through the mitigation hierarchy, and including through high-quality offsetting — the easier it will be for regulators to enshrine this best practice. The alternative would be for the regulators to come up with their own rules which would then be imposed on the private sector, causing unnecessary disruption.

3. Both removals and avoidance solutions are required to achieve net zero

Some in the market see a false dichotomy between credits that are seen as avoiding emissions and credits that are seen as removing greenhouse gasses. But, provided they are high quality, both “avoidance” and “removals” credits can achieve the exact same impact — though over the coming decades we will see a shift towards more removals credits, as regulations around the world obviate the need for avoidance credits. With high-quality data can we get a true sense of the quality of each credit, regardless of whether they are avoidance or removals. Given the scale of the climate crisis we face, we need every lever available — including both avoidance and removals credits — rather than getting caught up in pointless debates about which is better.

Overall, what I took away from San Francisco with me was even more determination to keep doing what we’re doing at Sylvera.

This will not be easy. I, like many others, have concerns about how we, as a species at the global level, don’t seem to be doing enough, fast enough.

The meeting made clear that the public sector alone can’t tackle climate change — the private sector has a huge role to play. As co-founder of a climate tech company, this is inspiring, motivating, and daunting. It reaffirms to me the importance of our work, and the importance of further developing partnerships with the public sector to make sure we all get this right, together, the first time.

This blog first appeared on the Sylvera website.

Roadmap Announced for New Voluntary Carbon Market Standards for High-quality Carbon Credits from the Integrity Council for the Voluntary Carbon Market

16 March 2022  |  The Integrity Council for the Voluntary Carbon Market (the Integrity Council), an independent governance body for the voluntary carbon market, announced today it will launch a definitive set of global threshold standards that will set a global benchmark for carbon credit quality in the third quarter of 2022, following a public consultation opening in May.

The Core Carbon Principles (CCPs) and Assessment Framework (AF) will set new threshold standards for high-quality carbon credits, provide guidance on how to apply the CCPs, and define which carbon-crediting programs and methodology types are CCP-eligible.

Annette Nazareth, Co-Chair of the Integrity Council, said: “To secure a liveable future, we urgently need to ensure that every tool available to us is working as effectively as possible to reduce and remove greenhouse gas emissions. The voluntary carbon market has a critical role to play in accelerating a just transition to 1.5 degrees centigrade, but it can only succeed if it is rooted in high integrity.”

The standards are being developed by the Integrity Council’s Expert Panel which is made up of twelve of the world’s leading scientists on the carbon markets, supported by eleven subject matter experts in topics ranging from carbon sequestration science to the rights of indigenous peoples and local communities (IPLCs).

Hugh Sealy, Co-Chair of the Integrity Council, said: “High quality carbon credits are an important complementary tool to reduce and remove greenhouse gas emissions above and beyond what would otherwise be possible, and to channel finance towards climate- resilient development. If we build integrity, scale will follow, but to do that, we must listen and learn from many different sources of knowledge and experience in the market and society at large, which is why we’re launching a full public consultation.”

The public consultation will be open to all, and is expected to attract interest from key stakeholder groups engaged in the voluntary carbon market, including finance, business, NGOs, IPLC groups, scientists, governments and members of the public. It will be

overseen by the British Standards Institute (BSI), which has over one hundred years of experience in standard setting, and will launch in May, lasting 30 days. Details on how to take part will be published on the Integrity Council website, and will be communicated via the Integrity Council’s newsletter and social media channels.

The Integrity Council’s Expert Panel is co-chaired by Pedro Martins Barrata of EDF (Environmental Defense Fund), Daniel Ortega-Pacheco (ESPOL Polytechnic University) and Lambert Schneider (Öko-Institute). The list of core Expert Panel members was published for the first time today on the Integrity Council website.

About the Integrity Council

The Integrity Council for the Voluntary Carbon Market (Integrity Council) is an independent governance body for the voluntary carbon market, which aims to ensure the voluntary carbon market accelerates a just transition to 1.5 degrees centigrade.

The Integrity Council sets and enforces definitive global threshold standards for the voluntary carbon market, drawing on the best science and expertise available, in order to channel finance towards genuine and additional greenhouse gas reductions and removals that go above and beyond what can otherwise be achieved, and that contribute to climate resilient development.


[email protected]

Blockchain for better: Untangling tokenisation and carbon markets

This blog first appeared on Carbon Pulse.

With the hype around web 3.0, it’s important to be mindful about which decentralised approaches to deploy in carbon markets, and – importantly – how to deploy them. Technology is agnostic toward its ultimate effect. Software can help you shop from your sofa or it can deliver malware that takes down an energy grid.

So it is with tokenisation of carbon credits.

Done right, tokenisation can increase access to carbon markets, create a better record of transactions, and when used with smart contracts, digital MRV systems and good governance it can create trust in areas lacking proper governance and help narrow the gap between those creating the impact and those who wish to support, sponsor or fund it.

Done poorly, it can be a wasted use of a distributed ledger technology (and the associated energy requirements), or worse, a scam.

Representing real carbon credits

The first premise is perhaps an obvious one: to deliver the impact that’s promised. Technically, tokenisation can represent anything the issuer wishes. This is why it’s important that when a token is marketed as a carbon credit or as delivering the impact a carbon credit represents – one tonne of CO2 permanently prevented from entering the atmosphere – it is professionally and independently verified.

This means that any token billed as reducing, compensating for, or offsetting your footprint has all the fundamental attributes for carbon credits: real, additional, permanent, robustly quantified, independently verified, and uniquely claimed.

Of concern, there are a number of emerging initiatives that implicitly or explicitly market themselves as carbon credits, yet are not. Some promise to compensate for, or even “erase” your carbon footprint when you purchase their tokens, yet fail to meet common standards for additionality, monitoring, or permanence.

While these efforts may indeed deliver some positive impact for some period of time, to claim to have offset or compensate (i.e. to leave the atmosphere better off than if the token had not been purchased and retired) a tonne of carbon simply does not hold up.

Full transparency of attributes of the underlying credit

Beyond the fundamental characteristics required of a carbon credit, tokenisation should leverage the power of its technology to catalyse a race to the top rather than simply using new infrastructure to facilitate business as usual.

Klima DAO made a splash with their launch in late 2021, backed by celebrity investor Mark Cuban. Klima DAO considers any Verra credit a “Base Carbon Tonne”, which comprises a pool from which $KLIMA coins can be minted.

Yet when some very cynical actors bridged 670,000 VCUs  from a HFC23 decomposition project in Yingpeng, China, a project type that had been effectively discredited in the early 2010s, the liquidity tradeoff became very clear. While this was unlikely to be the only factor affecting price, $KLIMA saw a precipitous drop in value from which the coin has not recovered.

Proponents of blockchain celebrate its capacity for transparency. But if this power is wielded only on tracing transactions, not the details of what’s being transacted or by whom, we’ve missed a trick – especially in such a heterogeneous market.

Fully capturing the detailed attributes of carbon credits can counter the negative impacts of commodification and incentivise carbon projects with deep sustainable development impact. For example, community services projects like off-grid renewables, clean cooking solutions, or clean water access often deliver benefits far beyond the carbon reduction – for better health, improved livelihoods, and even reduced deforestation and biodiversity conservation.

Clarity of verified impact can allow credits to be valued accordingly and catalyse even greater positive benefits – enabling carbon markets to deliver on climate justice.

Compliance and engagement with issuing standard

Carbon markets are becoming increasingly diversified, making the tracking of credits and claims made by relevant parties increasingly critical. The public registry of the standard that issued a credit is the source of truth for the status of that credit. This means that any secondary market, blockchain-based or otherwise, must be in compliance with the issuing standard’s Terms and Conditions to ensure legal ownership of the credit and rights to claim the underlying impact, and must communicate any change in status of the credit back to the registry.

Simply issuing a token does not confer legal rights to the underlying credit or impact the token is said to represent. In fact, most standards have legal terms that explicitly prohibit this. In extreme cases, a registry may have to cancel credits because of a grievance or non-conformity. Without two-way communication with the issuing standard, tokens representing those credits risk becoming meaningless.

Proper integration with the issuing standard and its legal terms allows for harmonisation with national and global registries needed report accurately on progress to the Paris Agreement, avoiding double counting and double claiming. This is the ground truth for knowing how we’re doing in combatting the climate emergency, and protects the rights and claims of users up and down the value chain.

Tokens for good

Gold Standard has written extensively about the potential for innovative technology to positively disrupt carbon markets and climate action generally. We welcome the transformative potential of tokenisation of positive impact designed with these principles in mind.

We remain open to partnerships in this fast-moving space and will explore this and further next-generation digitisation approaches within the Gold Standard IQ programme recently funded by  and through our Open Collaboration for Digital MRV announced at COP26.

Stay tuned for more details about how we plan to authorise tokenisation of Gold Standard credits.